UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended April 30, 2013
Or
o 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 000-15266
BIO-REFERENCE LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY |
|
22-2405059 |
(State or other jurisdiction of incorporation or organization) |
|
(IRS Employer Identification No.) |
481 Edward H. Ross Drive, Elmwood Park, NJ |
|
07407 |
(Address of principal executive offices) |
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(Zip Code) |
(201) 791-2600
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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 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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated file in Rule 12b-2 of the Exchange Act.
Large accelerated filer o |
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Accelerated Filer x |
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Non-accelerated Filer o |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of the issuers common stock, as of the latest practicable date: 27,663,213 shares of Common Stock ($.01 par value) at June 3, 2013.
BIO-REFERENCE LABORATORIES, INC.
FORM 10-Q
April 30, 2013
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Page |
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Item 1. |
Financial Statements |
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Consolidated Balance Sheets as of April 30, 2013 (unaudited) and October 31, 2012. |
1 |
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3 | |
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4 | |
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6 | |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
10 | |
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15 | ||
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15 | ||
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16 | ||
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16 | ||
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16 | ||
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17 | ||
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Certifications |
18-21 |
PART I FINANCIAL INFORMATION
BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARIES
[Dollars In Thousands Except Share and Per Share Data]
ASSETS
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April 30, |
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October 31, |
| ||
|
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2013 |
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2012 |
| ||
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(Unaudited) |
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| ||
CURRENT ASSETS: |
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Cash and Cash Equivalents |
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$ |
25,538 |
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$ |
25,143 |
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Accounts Receivable - Net |
|
176,438 |
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153,247 |
| ||
Inventory |
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14,468 |
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14,902 |
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Other Current Assets |
|
5,223 |
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5,373 |
| ||
Deferred Tax Assets |
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27,446 |
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24,912 |
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TOTAL CURRENT ASSETS |
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249,113 |
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223,577 |
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PROPERTY AND EQUIPMENT - AT COST |
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113,861 |
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102,701 |
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LESS: Accumulated Depreciation |
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(58,727 |
) |
(52,261 |
) | ||
PROPERTY AND EQUIPMENT - NET |
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55,134 |
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50,440 |
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OTHER ASSETS: |
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Investments in Unconsolidated Affiliate |
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5,352 |
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4,977 |
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Deposits |
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1,001 |
|
956 |
| ||
Goodwill - Net |
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25,986 |
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23,408 |
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Intangible Assets - Net |
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10,912 |
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6,323 |
| ||
Other Assets |
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1,115 |
|
866 |
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Deferred Tax Asset |
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2,780 |
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2,278 |
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TOTAL OTHER ASSETS |
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47,146 |
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38,808 |
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TOTAL ASSETS |
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$ |
351,393 |
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$ |
312,825 |
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The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
[Dollars In Thousands Except Share and Per Share Data]
LIABILITIES AND SHAREHOLDERS EQUITY
|
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April 30, |
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October 31, |
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2013 |
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2012 |
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(Unaudited) |
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CURRENT LIABILITIES: |
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Accounts Payable |
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$ |
46,746 |
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$ |
41,288 |
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Accrued Salaries and Commissions Payable |
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15,933 |
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16,490 |
| ||
Accrued Taxes and Expenses |
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13,770 |
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9,753 |
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Other Short Term Acquisition Payable |
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1,296 |
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0 |
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Revolving Note Payable - Bank |
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9,377 |
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0 |
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Current Maturities of Long-Term Debt |
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479 |
|
464 |
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Capital Lease Obligations - Short-Term Portion |
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4,424 |
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3,957 |
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TOTAL CURRENT LIABILITIES |
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92,025 |
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71,952 |
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LONG-TERM LIABILITIES |
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Capital Lease Obligations - Long-Term Portion |
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9,849 |
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9,463 |
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Long - Term Debt Net of Current Portion |
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3,920 |
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4,163 |
| ||
TOTAL LONG-TERM LIABILITIES |
|
13,769 |
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13,626 |
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SHAREHOLDERS EQUITY |
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Preferred Stock $.10 Par Value; Authorized 1,666,667 shares, including 3,000 shares of Series A Junior Preferred Stock None Issued |
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0 |
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0 |
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Common Stock, $.01 Par Value; Authorized 35,000,000 shares: |
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Issued and Outstanding 27,651,813 and 27,707,382 at April 30, 2013 and at October 31, 2012, respectively |
|
277 |
|
277 |
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Additional Paid-In Capital |
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39,256 |
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40,907 |
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Retained Earnings |
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206,066 |
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186,063 |
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TOTAL SHAREHOLDERS EQUITY |
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245,599 |
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227,247 |
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
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$ |
351,393 |
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$ |
312,825 |
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The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
[Dollars In Thousands Except Share and Per Share Data]
[UNAUDITED]
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Three months ended |
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Six months ended |
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April 30, |
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April 30, |
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2013 |
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2012 |
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2013 |
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2012 |
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NET REVENUES: |
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$ |
176,452 |
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$ |
151,443 |
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$ |
337,709 |
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$ |
290,236 |
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COST OF SERVICES: |
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Depreciation and Amortization |
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3,777 |
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3,265 |
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7,316 |
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6,274 |
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Employee Related Expenses |
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41,824 |
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36,811 |
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81,883 |
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71,250 |
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Reagents and Laboratory Supplies |
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33,767 |
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29,546 |
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65,477 |
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57,325 |
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Other Cost of Services |
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16,408 |
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14,287 |
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31,435 |
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27,735 |
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TOTAL COST OF SERVICES |
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95,776 |
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83,909 |
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186,111 |
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162,584 |
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GROSS PROFIT ON REVENUES |
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80,676 |
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67,534 |
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151,598 |
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127,652 |
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GENERAL AND ADMINISTRATIVE EXPENSES: |
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Depreciation and Amortization |
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983 |
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881 |
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1,892 |
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1,723 |
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General and Administrative Expenses |
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43,812 |
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39,772 |
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85,453 |
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76,616 |
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Bad Debt Expense |
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15,172 |
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10,110 |
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27,785 |
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19,258 |
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TOTAL GENERAL AND ADMINISTRATIVE EXPENSES |
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59,967 |
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50,763 |
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115,130 |
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97,597 |
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INCOME FROM OPERATIONS |
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20,709 |
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16,771 |
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36,468 |
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30,055 |
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OTHER (INCOME) EXPENSE: |
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Interest Expense |
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434 |
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412 |
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733 |
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771 |
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Interest Income |
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(24 |
) |
(42 |
) |
(59 |
) |
(84 |
) | ||||
Other (Income) Expense |
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104 |
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0 |
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225 |
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0 |
| ||||
TOTAL OTHER (INCOME) EXPENSES - NET |
|
514 |
|
370 |
|
899 |
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687 |
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INCOME BEFORE INCOME TAXES |
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20,195 |
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16,401 |
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35,569 |
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29,368 |
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Provision for Income Taxes |
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8,857 |
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7,095 |
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15,566 |
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12,697 |
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NET INCOME |
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$ |
11,338 |
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$ |
9,306 |
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$ |
20,003 |
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$ |
16,671 |
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NET INCOME PER COMMON SHARE - BASIC: |
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$ |
0.41 |
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$ |
0.34 |
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$ |
0.72 |
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$ |
0.60 |
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WEIGHTED AVERAGE NUMBER OF SHARES - BASIC: |
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27,698,146 |
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27,684,715 |
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27,707,241 |
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27,786,216 |
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NET INCOME PER COMMON SHARE - DILUTED: |
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$ |
0.41 |
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$ |
0.33 |
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$ |
0.72 |
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$ |
0.60 |
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WEIGHTED AVERAGE NUMBER OF SHARES - DILUTED: |
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27,879,448 |
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27,877,697 |
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27,891,431 |
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27,960,069 |
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The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Dollars In Thousands Except Share and Per Share Data]
[UNAUDITED]
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Six months ended |
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April 30, |
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2013 |
|
2012 |
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OPERATING ACTIVITIES: |
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Net Income |
|
$ |
20,003 |
|
$ |
16,671 |
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Adjustments to Reconcile Net Income to Cash Provided by (Used for) Operating Activities: |
|
|
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Depreciation and Amortization |
|
9,208 |
|
7,997 |
| ||
Deferred Income Tax (Benefit) Expense |
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(3,036 |
) |
(2,243 |
) | ||
Stock Based Compensation |
|
290 |
|
290 |
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(Gain) Loss on Disposal of Fixed Assets |
|
125 |
|
343 |
| ||
Undistributed Equity Method (Income) Loss |
|
225 |
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0 |
| ||
Change in Assets and Liabilities, (Increase) Decrease in: |
|
|
|
|
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Accounts Receivable |
|
(28,554 |
) |
(2,773 |
) | ||
Provision for Doubtful Accounts |
|
5,363 |
|
3,371 |
| ||
Inventory |
|
434 |
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(836 |
) | ||
Other Current Assets |
|
150 |
|
(459 |
) | ||
Other Assets |
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(249 |
) |
(250 |
) | ||
Deposits |
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(45 |
) |
(60 |
) | ||
Increase (Decrease) in: |
|
|
|
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Accounts Payable and Accrued Liabilities |
|
8,918 |
|
1,599 |
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|
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NET CASH - OPERATING ACTIVITIES |
|
12,832 |
|
23,650 |
| ||
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INVESTING ACTIVITIES: |
|
|
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Acquisition of Equipment and Leasehold Improvements |
|
(10,585 |
) |
(9,667 |
) | ||
Business Acquisitions and Related Costs |
|
(6,837 |
) |
(4,375 |
) | ||
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|
|
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NET CASH - INVESTING ACTIVITIES |
|
(17,422 |
) |
(14,042 |
) | ||
|
|
|
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FINANCING ACTIVITIES: |
|
|
|
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Payments of Long-Term Debt |
|
(228 |
) |
(631 |
) | ||
Payments of Capital Lease Obligations |
|
(2,223 |
) |
(1,666 |
) | ||
Increase (Decrease) in Revolving Line of Credit |
|
9,377 |
|
(4,469 |
) | ||
Common Stock Repurchase |
|
(2,030 |
) |
(5,193 |
) | ||
Proceeds from Exercise of Options |
|
89 |
|
64 |
| ||
|
|
|
|
|
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NET CASH - FINANCING ACTIVITIES |
|
4,985 |
|
(11,895 |
) | ||
|
|
|
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
395 |
|
(2,287 |
) | ||
|
|
|
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIODS |
|
25,143 |
|
22,013 |
| ||
|
|
|
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CASH AND CASH EQUIVALENTS AT END OF PERIODS |
|
$ |
25,538 |
|
$ |
19,726 |
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|
|
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash paid during the period for: |
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|
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Interest |
|
$ |
656 |
|
$ |
761 |
|
Income Taxes |
|
$ |
16,339 |
|
$ |
20,340 |
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The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
[Dollars In Thousands]
[UNAUDITED]
During the six-month periods ended April 30, 2013 and April 30, 2012, the Company entered into capital leases totaling $3,076 and $4,896, respectively.
During the six-month periods ended April 30, 2013 and April 30, 2012, the Company wrote-off approximately $2,501 and $1,478 of property and equipment that were mostly fully depreciated.
During the six-month periods ended April 30, 2013 and April 30, 2012, the Company recorded approximately $290 and $290 of stock based compensation expense, respectively, related to granting of stock options and stock to employees pursuant to existing agreements.
BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[Dollars In Thousands Except Share and Per Share Data, Or Unless Otherwise Noted]
(UNAUDITED)
[1] Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for complete audited financial statements. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in these statements. Interim results are not necessarily indicative of results for a full year. Reference is made to the October 31, 2012 audited consolidated financial statements of Bio-Reference Laboratories, Inc. contained in its Annual Report on Form 10-K for the year ended October 31, 2012.
The consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes for the year ended October 31, 2012 as filed with the Securities and Exchange Commission in the Companys Annual Report on Form 10-K. Significant accounting policies followed by the Company are set forth in Note 2 to the Companys 2012 Annual Report on Form 10-K.
[2] Fair Value Measurements.
As of April 30, 2013, the Companys financial instruments primarily consist of cash, short-term trade receivables and payables for which their carrying amounts approximate fair values, and long term debt, for which based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, its carrying amount approximates its fair value.
The Company has evaluated subsequent events through the date the financial statements are issued as evidenced by the date of filing of this report with the Securities and Exchange Commission. No such reportable events have occurred.
[3] Certain prior year amounts have been reclassified to conform to the current year presentation. The Company adopted Accounting Standard Update (ASU) No. 2011-7: Health Care Entities (Topic 954) Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities commencing with the current fiscal year, the first year such standard is required for the Company. The adoption of this update did not have a material impact on the Companys financial statements.
Although this update does not have a material impact on the Companys financial statements as a whole, it requires that we adjust our presentation of our statement of operations along with prior periods presented in this report to maintain comparability. As the result of this change in presentation, our Net Revenues, Gross Profit on Revenues and our General and Administrative Expenses would change while our Operating Income, Net Income and Earnings per Share will remain the same. The presentation is adjusted for a portion of our Bad Debt Expense that is now reported in our Net Revenues as required under ASU No. 2011-7.
[4] Service revenues are principally generated from laboratory testing services including chemical diagnostic tests such as blood analysis, urine analysis and genetic testing among others. Service revenues are recognized at the time the testing services are performed and are reported at their estimated net realizable amounts.
Service revenues before provision for bad debts are determined utilizing gross service revenues net of contractual adjustments and discounts. Even though it is the responsibility of the patient to pay for laboratory service bills, most individuals in the United States have an agreement with a third party payor such as Medicare, Medicaid or a commercial insurance provider to pay all or a portion of their healthcare expenses; the majority of services provided by Bio-Reference Laboratories, Inc. (BRLI) are to patients covered under a third party payor contract. In certain cases, the individual has no insurance or does not provide insurance information and in other cases tests are performed under contract to a professional organization (such as physicians, hospitals, and clinics) which reimburse BRLI directly; in the remainder of the cases, BRLI is provided the third party billing information and seeks payment from the third party under the terms and conditions of the third party payor for health service providers like BRLI. Each of these third party payors may differ not only with regard to rates, but also with regard to terms and conditions of payment and providing coverage (reimbursement) for specific tests. Estimated revenues are established based on a series of highly complex procedures and judgments that require industry specific healthcare experience and an understanding of payor methods and trends. We review our calculations on a monthly basis in order to make certain that we are properly allowing for the uncollectable portion of our gross billings due to the contractual adjustments and discounts and that our estimates remain sensitive to variances and changes within our payor groups. The contractual allowance calculation is made on the basis of historical allowance rates for the various specific payor groups on a monthly basis with a greater weight being given to the most recent trends; this process is adjusted based on recent changes in underlying contract provisions and shifts in the testing being performed. This calculation is routinely analyzed by BRLI on the basis of actual allowances issued by payors and the actual payments made to determine what adjustments, if any, are needed. The table below shows the adjustments made to gross service revenues to arrive at net revenues, the amount reported on our statement of operations.
|
|
($) |
| ||||||
|
|
Three Months Ended |
|
Six Months Ended |
| ||||
|
|
April 30, |
|
April 30, |
| ||||
|
|
[Unaudited] |
|
[Unaudited] |
| ||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
Gross Service Revenues |
|
861,506 |
|
763,823 |
|
1,660,216 |
|
1,447,639 |
|
|
|
|
|
|
|
|
|
|
|
Contractual Adjustments and Discounts: |
|
|
|
|
|
|
|
|
|
Medicare/Medicaid Portion |
|
86,433 |
|
81,318 |
|
168,260 |
|
156,059 |
|
All Other Third Party Payors* |
|
584,211 |
|
519,117 |
|
1,127,496 |
|
978,273 |
|
Total Contractual Adjustments and Discounts |
|
670,644 |
|
600,435 |
|
1,295,756 |
|
1,134,332 |
|
Service Revenues Net of Contractual Adjustments and Discounts |
|
190,862 |
|
163,388 |
|
364,460 |
|
313,307 |
|
Patient Service Revenue Provision for Bad Debts** |
|
14,410 |
|
11,945 |
|
26,751 |
|
23,071 |
|
Net Revenues |
|
176,452 |
|
151,443 |
|
337,709 |
|
290,236 |
|
* All Other Third Party and Direct Payors consists of almost eight hundred distinct payors, including commercial health insurers and administrators as well as professionally billed accounts such as physicians, hospitals, clinics and other direct billed accounts.
** Represents the amount of Bad Debt Expense that is now required to be presented as a deduction from patient service revenue (net of contractual allowances and discounts) pursuant to ASU No. 2011-7.
When new business is received by BRLI, service revenues net of contractual adjustments and discounts are calculated by reducing gross service revenues by the estimated contractual allowance. The Patient Service Revenue Provision for Bad Debts represents the amount of bad debt expense expected to occur on patient service revenue based upon our experience. The remaining bad debt expense is presented as part of operating expenses. The bad debt expense presented as part of operating expense represents the bad debt expense related to receivables from service revenues determined after taking into account our ability to collect on such revenue.
BRLI recognized the amounts in subsequent periods for actual allowances/discounts to gross service revenue; bad debt may have been adjusted over the same periods of time to maintain an accurate balance between net revenues and actual revenues. Management has reviewed the allowances/discounts recognized in subsequent periods and believes the amounts to be immaterial. A number of proposals for legislation or regulation continue to be under discussion which could have the effect of substantially reducing Medicare reimbursements for clinical laboratories or introducing cost sharing to beneficiaries. 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] It is typically the responsibility of the patient to pay for laboratory service bills. Most individuals in the United States have an agreement with a third party payor such as Medicare, Medicaid or commercial insurance to pay all or a portion of their healthcare expenses; this represents the major portion of payment for all services provided by BRLI. In certain cases, the individual has no insurance or does not provide insurance information; in the remainder of the cases, BRLI is provided the third party billing information, usually by the referring physician, and seeks payment from the third party under the terms and conditions of the third party payor for health service providers like BRLI. Each of these third party payors may differ not only with regard to rates, but also with regard to terms and conditions of payment and coverage of specific tests. BRLI routinely reviews the reimbursement policies and subsequent payments and collection rates from these different types of payors. Contractual adjustments and discounts are recorded as reductions to gross service revenues and are collectively referred to as the contractual allowance. BRLI has not been required to record an adjustment in a subsequent period related to revenue recorded in a prior period which was material in nature. Aging of accounts receivable is monitored by billing personnel and follow-up activities including collection efforts are conducted as necessary. BRLI writes off receivables against the allowance for doubtful accounts when they are deemed uncollectible. For client billing, accounts are written off when all reasonable collection efforts prove to be unsuccessful. Patient accounts, where the patient is directly responsible for all or a remainder portion of the account after partial payment or denial by a third party payor, are written off after the normal dunning cycle has occurred, although these may be subsequently transferred to a third party collection agency after being written off. Third party payor accounts are written off when they exceed the payers timely filing limits. Accounts Receivable on the balance sheet is net of the following amounts for contractual credits and doubtful accounts:
|
|
($) |
| ||
|
|
[Unaudited] |
|
|
|
|
|
April 30, |
|
October 31, |
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
|
Contractual Credits/Discounts |
|
336,642 |
|
267,921 |
|
Doubtful Accounts |
|
56,636 |
|
51,274 |
|
Total Allowance |
|
393,278 |
|
319,195 |
|
[6] The following disclosures present certain information on the Companys intangible assets as of April 30, 2013 (Unaudited) and October 31, 2012. All intangible assets are being amortized over their estimated useful lives, as indicated below, with no estimated residual value.
April 30, 2013
|
|
Weighted- |
|
|
|
|
|
Net of |
|
|
|
Average |
|
|
|
Accumulated |
|
Accumulated |
|
|
|
Amortization |
|
|
|
Amortization |
|
Amortization |
|
Intangible Asset |
|
Period |
|
Cost ($) |
|
($) |
|
($) |
|
|
|
|
|
|
|
|
|
|
|
Customer Lists |
|
20 |
|
8,739 |
|
2,680 |
|
6,059 |
|
Covenants Not-to-Compete |
|
5 |
|
5,095 |
|
4,305 |
|
790 |
|
Patents and Licenses |
|
17 |
|
5,297 |
|
1,234 |
|
4,063 |
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
|
19,131 |
|
8,219 |
|
10,912 |
|
October 31, 2012
|
|
Weighted-Average |
|
|
|
|
|
Net of |
|
|
|
Amortization |
|
|
|
Accumulated |
|
Accumulated |
|
Intangible Asset |
|
Period |
|
Cost ($) |
|
Amortization ($) |
|
Amortization ($) |
|
|
|
|
|
|
|
|
|
|
|
Customer Lists |
|
20 |
|
4,573 |
|
2,537 |
|
2,036 |
|
Covenants Not-to-Compete |
|
5 |
|
4,305 |
|
4,257 |
|
48 |
|
Patents and Licenses |
|
17 |
|
5,297 |
|
1,058 |
|
4,239 |
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
|
14,175 |
|
7,852 |
|
6,323 |
|
The aggregate intangible amortization expense for the three months ended April 30, 2013 and 2012 was $227 and $156, respectively. The aggregate intangible amortization expense for the six-months ended April 30, 2013 and 2012 was $367 and $299, respectively. The estimated intangible asset amortization expense for the fiscal year ending October 31, 2013 and for the four subsequent years is as follows:
October 31, |
|
($) |
|
2013 |
|
452 |
|
2014 |
|
917 |
|
2015 |
|
892 |
|
2016 |
|
875 |
|
2017 |
|
870 |
|
Thereafter |
|
6,906 |
|
|
|
|
|
Total |
|
10,912 |
|
[7] Revolving Note Payable - Bank
In October 2011, the Company entered into an amended revolving note payable loan agreement with PNC Bank, N.A. The maximum amount of the credit line available to the Company pursuant to the loan agreement is the lesser of (i) $45,000 or (ii) 50% of the Companys qualified accounts receivable, as defined in the agreement. The amendment to the Loan and Security Agreement provides for an interest rate on advances to be subject, at the election of the Company, to either the banks base rate or the Eurodollar rate of interest plus, in certain instances, an additional interest percentage. The additional interest percentage charge on banks base rate borrowings and on Eurodollar rate borrowings ranges from 1% to 4% and is determined based upon certain financial ratios achieved by the Company. On April 30, 2013, the Company had elected to have all of the total advances outstanding to be subject to the banks base rate of interest of 3.5%. The credit line is collateralized by substantially all of the Companys assets. The line of credit is available through October 2016 and may be extended for annual periods by mutual consent thereafter. The terms of this agreement contain, among other provisions, requirements for maintaining defined levels of capital expenditures and fixed charge coverage, and the prohibition of the payment of cash dividends by the Company. As of April 30, 2013, the Company utilized $9,377 of the available credit under this revolving note payable loan agreement.
[8] Long-Term Debt - Bank
In December 2010, the Company issued a seven-year term note for $5,408 at the rate of interest of 6.12% per annum for the financing of new equipment. The note is payable in 84 equal monthly installments commencing on January 29, 2011 of $61 including principal and interest followed by a balloon payment of the principal and interest outstanding on the loan repayment date of December 29, 2017. The balance on this note as of April 30, 2013 is approximately $4,399.
[9] The provision for income taxes for the three months ended April 30, 2013 consists of a current tax provision of $12,114 and a deferred tax benefit of $3,257. The provision for income taxes for the six-months ended April 30, 2013 consists of a current tax provision of $18,601 and a deferred tax benefit of $3,035.The provision for income taxes for the three months ended April 30, 2012 consists of a current tax provision of $8,398 and a deferred tax benefit of $1,302. The provision for income taxes for the six-months ended April 30, 2012 consists of a current tax provision of $14,940 and a deferred tax benefit of $2,243. On April 30, 2013, the Company had a current deferred tax asset of $27,446 and a long-term deferred tax asset of $2,780 included in other assets. On April 30, 2012, the Company had a current deferred tax asset of $23,438 included in other current assets and a long-term deferred tax asset of $2,357 included in other assets.
[10] ] On December 21, 2012, we entered into an agreement pursuant to which we agreed to purchase all of the authorized, issued and outstanding shares of Meridian Clinical Laboratory, Corp. ( MCL), a Florida corporation. More information about MCL and the agreement may be found in the Form 8-K the Company filed on December 27, 2012.
On December 31, 2012, we entered into an agreement pursuant to which we agreed to purchase all of the authorized, issued and outstanding shares of Florida Clinical Laboratory, Inc. (FCL), a Florida corporation. More information about FCL and the agreement may be found in the Form 8-K we filed on January 4, 2013.
The initial accounting for these two acquisitions is now complete. Accordingly Management updated its previously reported provisional amounts of the assets, liabilities and equity interests initially reported on its first quarter report on form 10-Q. The following table sets forth these final allocations.
|
|
($) |
| ||||
|
|
FCL |
|
MCL |
|
Totals: |
|
|
|
|
|
|
|
|
|
Accounts Receivable |
|
1,008 |
|
232 |
|
1,240 |
|
Autos |
|
137 |
|
48 |
|
185 |
|
Medical Equipment |
|
225 |
|
3 |
|
228 |
|
Computer Equipment |
|
21 |
|
|
|
21 |
|
Leasehold Improvements |
|
53 |
|
|
|
53 |
|
Other Non-Current Assets |
|
3 |
|
|
|
3 |
|
Non-Compete Agreement |
|
747 |
|
43 |
|
790 |
|
Deposits |
|
|
|
2 |
|
2 |
|
Customer Relationships in Place |
|
3,235 |
|
930 |
|
4,165 |
|
Goodwill |
|
1,905 |
|
673 |
|
2,578 |
|
Accounts Payable |
|
118 |
|
83 |
|
201 |
|
Long Term Debt (Auto-Loans) |
|
200 |
|
0 |
|
200 |
|
Short Term Acquisition Payable |
|
1,000 |
|
250 |
|
1,250 |
|
[11] Common Stock Repurchase
On November 11, 2011, the Company announced that its board of directors approved a Stock Repurchase Program authorizing the repurchase of up to 1,000,000 shares of its Common Stock at prevailing market prices over the period ending October 31, 2012. That period was subsequently extended to the period ending October 31, 2013. During the six-month period ended April 30, 2013, the Company repurchased 81,600 shares of its common stock at a cost of $2,030. These repurchased shares have been recorded as canceled.
Forward-Looking Statements
Statements included in this quarterly report on Form 10-Q (the Quarterly Report) that are not historical in nature, are intended to be, and are hereby identified as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as expects, anticipates, intends, plans, believes, seeks, estimates, will or words of similar meaning and include, but are not limited to, statements about our expected future business and financial performance. Statements looking forward in time are included in this report pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks and uncertainties, many of which are beyond our ability to control, that may cause our actual results in future periods to be materially different from any future performance suggested herein.
Several factors could cause actual results to differ materially from those currently anticipated due to a number of factors in addition to those discussed under Risk Factors in our October 31, 2012 Form 10-K including:
Loss or suspension of a license or imposition of a fine or penalties under, or future changes in, the law or regulations of CLIA, or those of state laboratory licensing laws;
Failure to comply with HIPAA, which could negatively impact profitability and cash flows;
FDA regulation of Laboratory Developed Tests and clinical laboratories;
Failure to comply with federal and state anti-kickback laws;
Failure to maintain the security of patient-related information;
Failure to comply with the Federal Occupational Safety and Health Administration requirements and the recently passed Needlestick Safety and Prevention Act;
Failure to comply with federal and state laws and regulations related to submission of claims for our services;
Changes in regulation and policies, including increasing downward pressure on health care reimbursement;
Efforts by third-party payors to reduce utilization and reimbursement for clinical testing services;
Failure to timely or accurately bill for our services;
Our failure to integrate newly acquired businesses and the costs related to such integration;
Increased competition, including price competition;
Our ability to attract and retain experienced and qualified personnel;
Our failure to obtain and retain new clients and business partners, or a reduction in tests ordered or specimens submitted by existing clients;
Adverse litigation results; and
Failure to establish, and perform to, appropriate quality standards to assure that the highest level of quality is observed in the performance of our testing services.
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
[Dollars In Thousands Except Per Share Data, Total Patient Data Or Unless Otherwise Noted]
Overview
We are a national clinical diagnostic laboratory located in northeastern New Jersey. We are a national laboratory in certain focused areas of laboratory testing and a full service laboratory in the New York super-region. We have developed a national reputation for our expertise in certain focused areas of clinical testing. GenPath, the name by which we are known for our cancer and oncology services, is recognized for the superior hematopathology services it provides throughout the country. Our Womens Health initiative, through which we provide dedicated services for obstetrics and gynecology practices, including a unique, technically advanced multiplex process for identifying sexually transmitted infections, is also offered as GenPath. Our regional footprint lies within the New York City metropolitan area and the surrounding areas of New Jersey and southern New York State as well eastern Pennsylvania and some areas of western Connecticut; we also provide services further into New York State, Pennsylvania, Delaware and Maryland. As a regional provider, we are a full-service laboratory that primarily services physician office practices. Our drivers pick up samples and deliver reports and supplies; we provide sophisticated technical support, phlebotomy services or patient service centers where appropriate, and electronic communication services in many cases.
Physicians outside of this regional footprint send samples to our laboratory in order to take advantage of the expertise that we are able to provide in blood-based cancer pathology and associated diagnostics or to take advantage of the superior service, support and technologically advanced testing we offer in our Womens Health initiative. These accounts frequently send routine testing to us as well in order to simplify their office workflow and to take advantage of our outstanding capability, service and support. Our correctional healthcare services are used throughout the country at prisons and jails. The focused markets we serve on a national basis outside of our regional footprint do not require many of the logistical and other ancillary support services required as a full service laboratory on a regional basis. Within our regional footprint, we provide all of the same services that we provide on a national basis as well as some regionally focused diagnostic services, such as histology and pathology support services, substance abuse testing, fertility testing, hemostasis testing, womens health testing, and molecular diagnostics that are unavailable from many of our smaller regional competitors; some of the regional testing may be provided outside of physician offices in clinics or other bulk deliverers of healthcare. In October 2012, we launched Laboratorio Buena Salud (LBS), the first national testing laboratory dedicated to serving Spanish-speaking populations in the United States on a Spanish language first basis. All interactions with patients and physician offices are handled in Spanish unless otherwise requested by the patient or office without the need of choosing Spanish or English
Over the last few years, there have been fundamental changes in the laboratory services industry. In the 1990s, the industry was negatively impacted by the growth of managed care, increased government regulation, and investigations into fraud and abuse. These factors led to revenue and profit declines and industry consolidations, especially among commercial laboratories. There are currently two national mega-laboratories and Bio-Reference Laboratories, together with some specialty laboratories and a few small laboratories in the US public markets. There is one other Australian-based laboratory with significant presence in the US markets. In addition to these publicly-traded commercial laboratories, there are numerous hospital outreach programs and smaller reference laboratories that compete for the commercial clinical laboratory business scattered throughout the country. These clinical laboratories have had to improve efficiency, leverage economies of scale, comply with government regulations and other laws and develop more profitable approaches to pricing. Moreover, there has been a proliferation of technology advancements in clinical diagnostics over the last decade that has created significant opportunities for new testing and growth.
As a full service clinical laboratory, we are constantly looking for new technologies and new methodologies that will help us to grow. Since the turn of the century, our size alone has made us attractive to companies that are driving the advances in technology. We represent a significant opportunity for these companies to market their products with a nationally recognized specialty provider in our focused areas of specialty or in one of the major population centers of the worldthe New York super-region. We have had several successful strategic relationships with such technology opportunities. In addition to new
technology opportunities, we have an extremely seasoned and talented management staff that has been able to identify emerging laboratory markets that are under-served or under-utilized. We have recently developed programs for cardiology, histology and womens health to go along with our existing hemostasis, hematopathology and correctional healthcare initiatives which have already been established and in which we have been increasing our market share for the past several years. Over the past year, we launched several new, disruptive testing services. OnkoMatch, an offering that has emerged as a result of our joint venture with Massachusetts General Hospital, provides tumor genotyping for solid tumor cancer patients at reasonable and affordable pricing. Inherigen, our pre-natal carrier detection panel, provides broad-spectrum carrier detection of autosomal conditions that may affect child-bearing decisions. GenCerv is an advanced test for identifying which HPV positive patients are likely to have cervical cancer. StormPath is our virtual pathology solution that allows remote pathologists to use our technical laboratory capabilities and consult with our pathologists remotely in order to provide improved diagnostics. We continually seek to offer innovative testing services that are clinically relevant and which improve patient care.
The Company believes that it has an outstanding sales and marketing team and has implemented an acquisition strategy based on seeking out opportunities to acquire new technologies, new techniques, new opportunities that will enhance our existing business rather than seeking to acquire laboratories for their underlying business. Over the recent past we have made some strategic acquisitions based on this approach. Our philosophy regarding acquisitions is: we buy laboratories we consider to be synergistic and accretive. As we have explained in the past, we offer one stop shopping to physicians as a specialty lab. When we buy laboratories in other geographic areas that do not bring in specific technical expertise, we do so to better service our clients and to add growth in the area.
On December 21, 2012, we entered into an agreement pursuant to which we agreed to purchase all of the authorized, issued and outstanding shares of Meridian Clinical Laboratory, Corp. (MCL), a Florida corporation. Information about MCL and the agreement may be found in the Form 8-K we filed with the Securities and Exchange Commission on December 21, 2012. MCL is a small laboratory located in the heart of the South Florida Hispanic community and will serve as a base of operations for our Florida LBS program. This acquisition will be our Florida presence for LBS.
On December 31, 2012, we entered into an agreement pursuant to which we agreed to purchase all of the authorized, issued and outstanding shares of Florida Clinical Laboratory, Inc. (FCL), a Florida corporation. Information about FCL and the agreement may be found in the Form 8-K we filed with the Securities and Exchange Commission on January 4, 2013. FCL had excess capacity and a strong presence in an underserved area of testing in Florida; its facilities provide the Company with better capability in Florida while expanding our service into an underserved area for testing.
On April 27, 2012, we entered into an agreement pursuant to which we purchased preferred shares of IncellDx, Inc. (IncellDx), a Delaware corporation. Information about IncellDx and the agreement may be found in the Current Report on Form 8-K we filed on May 1, 2012. InCellDx developed a valuable test for more positively identifying the likelihood that a woman may have cervical cancer than HPV testing alone. The Company has since introduced GenCerv based on the technology developed at InCellDx.
While we recognize that we are a clinical laboratory that processes samples, we also understand that we are an information company that needs to effectively communicate the results of our efforts back to healthcare providers. Laboratory results play a major role in the implementation of physician healthcare. Laboratory results are used to diagnose, monitor and classify health concerns. In many cases, laboratory results represent the confirming data in diagnosing complicated health issues. Since laboratory results play such an important role in routine physician care, we have developed informatics solutions that leverage our role in healthcare. We built a web-based solution to quickly, accurately, conveniently and competitively collect ordering information and deliver results. That solution is called CareEvolve. CareEvolve is a basic tool for our own operations. We license the technology to other laboratories throughout the country in order for them to more effectively compete against the national mega-laboratories. The laboratories licensing our technology are typically not our competitors since they are outside our regional footprint.
We have also created our PSIMedica business unit that has developed a Clinical Knowledge Management (CKM) System that takes data from enrollment, claims, pharmacy, laboratory results and any other available electronic source to provide both administrative and clinical analysis of a population. The system uses proprietary algorithms to cleanse and configure the data and transfer the resulting information into a healthcare data repository. Using advanced cube technology methodologies, the data can be analyzed from a myriad of views and from highly granular transactional detail to global trended overview. Events such as the Hurricane Katrina disaster in Louisiana and general pressures from the government have made development of an electronic medical record system and Pay-for Performance reimbursement priority goals in the healthcare industry. A large portion of an individuals medical record consists of laboratory data and a key performance indicator in any Pay-for-Performance initiative is laboratory result data. Our CKM system is a mature, full functioning solution that will allow us to play a role in these important national initiatives.
To date, neither our PSIMedica business unit nor CareEvolve have produced significant independent revenues relative to the primary laboratory operations, but they are important tools that we offer in the ordinary course of our laboratory business operations.
Recent Events:
We adopted the Accounting Standard Update (ASU) No. 2011-07: Health Care Entities (Topic 954) Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities commencing with the current fiscal year, the first year such standard is required for the Company, We believe this update will have no material impact on the Companys financial statements.
Although this update does not have a material impact on the Companys financial statements as a whole, this update requires that we adjust the presentation of our statement of operations along with prior periods presented in this report to maintain comparability. As the result of this change in presentation, our Net Revenues, Gross Profit on Revenues and our General and Administrative Expenses will change while our Operating Income, Net Income and Earnings per Share will remain the same. The presentation is adjusted for a portion of our Bad Debt Expense that is now reported in our Net Revenues as required under ASU No. 2011-7.
Note [4] to our financial statements includes a table that shows the amount of Bad Debt expense relating to patient service revenue that was moved from the Selling and Administrative expense section of our statement of operations to the Net Revenue section.
Effective February 27, 2013, we announced that we will be offering NonInvasive PreNatal Testing (NIPT) through the Natera Panorama program. NIPT is a substitute for invasive amniocentesisand CVS testing and reduces risks associated with the testing process itself. We believe that offering an NIPT test enhances our Womens Health program and helps us to be a more comprehensive solution for the Obstetrician office.
Second Quarter Fiscal 2013 Compared to Second Quarter Fiscal 2012
The numbers in this comparison are affected by the change in presentation on our statement of operations as the result of the Company adopting ASU 2011-7 on November 1, 2012. See discussion of ASU 2011-7 in the notes to our consolidated financial statements for more information.
NET REVENUES:
Net revenues for the three-month period ended April 30, 2013 were $176,452 as compared to $151,443 for the three-month period ended April 30, 2012. This represents a 17% increase in net revenues. This increase is due to a 6% increase in patient counts and an increase in revenue per patient of 11% due to a shift in business to higher reimbursement esoteric testing, which continues to be the principal driver in increasing net revenue per patient. The number of patients serviced during the three-month period ended April 30, 2013 was 2,066, which was 6% greater when compared to the prior fiscal years corresponding three-month period. This increase in patient counts is mainly due to the overall success of all our lines of business. Net revenue per patient for the three-month period ended April 30, 2013 was $84.93 compared to net revenue per patient of $77.09 for the three-month period ended April 30, 2012, an increase of 11%.
Our revenues and patient counts could be adversely affected by a number of factors, including, but not limited, to an extended economic downturn in general or healthcare economic conditions, an unexpected reduction in reimbursement rates, increased market penetration by our competitors or a substantial adverse change in federal regulatory requirements governing our industry as well as a failure to continue the sizeable annual percentage increase in base business from significantly higher levels after 19 years of sustained growth.
Many provisions of Affordable Care Act (ACA) became effective January 1, 2013. At this time we are not yet aware as to how this will affect our revenues.
COST OF SERVICES:
Cost of services increased from $83,909 for the three-month period ended April 30, 2012 to $95,776 for the three-month period ended April 30, 2013, an increase of 14%. This increase in cost of services is basically in line with the increase in net revenues.
GROSS PROFITS:
Gross profits increased from $67,534 for the three-month period ended April 30, 2012 to $80,676 for the three-month period ended April 30, 2013, an increase of 19%. Gross profit margin increased to 45% from 46%.
GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative expenses for the three-month period ending April 30, 2012 were $50,763 as compared to $59,967 for the quarter ended April 30, 2013, an increase of $9,204 or 18%. This increase is in line with the increase in net revenues.
INTEREST EXPENSE:
Interest expense increased to $434 during the three-month period ending April 30, 2013 from $412 during the three-month period ended April 30, 2012. This decrease is due to an increase in the utilization of our PNC Banks credit line.
NET INCOME:
We realized net income of $11,338 for the three-month period ended April 30, 2013, as compared to $9,306 for the three-month period ended April 30, 2012, an increase of 22%. Pre-tax income for the period ended April 30, 2012 was $16,401, compared to $20,195 for the three-month period ended April 30, 2013, an increase of 23%. The provision for income taxes increased to $8,857 for the three-month period ended April 30, 2013 from $7,095 for the period ended April 30, 2012.
Six Months 2013 Compared to Six Months 2012
NET REVENUES:
Net revenues for the six-month period ended April 30, 2013 were $337,709 as compared to $290,236 for the six-month period ended April 30, 2012. This represents a 16% increase in net revenues. This increase is due to a 7% increase in patient counts and an increase in revenue per patient of 9%.
The number of patients serviced during the six-month period ended April 30, 2013 was 4,038, which was 7% greater when compared to the prior fiscal years corresponding six-month period. Net revenue per patient for the six-month period ended April 30, 2012 was $76.50 compared to net revenue per patient for the six- month period ended April 30, 2013 of $83.07, an increase of 9%.
COST OF SERVICES:
Cost of services increased to $186,111 for the six-month period ended April 30, 2013 from $162,584 for the six-month period ended April 30, 2012. This represents a 14% increase in direct operating costs. This increase in cost of services is basically in line with the increase in sales.
GROSS PROFITS:
Gross profits on net revenues increased to $151,598 for the six-month period ended April 30, 2013 from $127,652 for the six-month period ended April 30, 2012; an increase of 19%. Gross profit margins increased to 45% from 44% for the six-month period ended April 30, 2013 compared to the corresponding six-month period ended April 30, 2012. This is due to an increase in cost of services of 14% while net revenues increased 16%.
GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative expenses for the six-month period ended April 30, 2013 were $115,130 as compared to $97,597 for the six-month period ended April 30, 2012. This represents an increase of 18%. This increase is 2% more than the increase in net revenues. This increase is basically in line with the increase to our net revenues.
INTEREST EXPENSE:
Interest expense decreased to $733 during the six-month period ending April 30, 2013 as compared to $771 during the six-month period ending April 30, 2012, a decrease of $38. This decrease is due to primarily a decrease in our utilization of our PNC Bank credit line.
INCOME:
We realized net income of $20,003 or $0.72 per share for the six-month period ended April 30, 2013 as compared to $16,671 or $0.60 per share for the six-month period ended April 30, 2012, an increase of 20%. Our operating income increased by 21% for the six-month period ended April 30, 2013 as compared to the six-month period ended April 30, 2012. Pre-tax income for the period ended April 30, 2013 was $35,569 as compared to $29,368 for the period ended April 30, 2012, an increase of 21%. The provision for income taxes increased from $12,697 for the period ended April 30, 2012, to $15,566 (23%) for the current six-month period. Our effective tax rate increased from 43% to 44% due to an increase in our revenues earned in jurisdictions with higher tax rates.
LIQUIDITY AND CAPITAL RESOURCES:
Our working capital at April 30, 2013 was $157,088 as compared to $151,625 at October 31, 2012, an increase of 4%. Our cash position increased by approximately $395 during the current period. We increased our short-term debt by $15 and repaid $243 in existing debt. We had current liabilities of $92,025 at April 30, 2013. We generated $12,832 in cash from operations, compared to $23,650 for the quarter ended April 30, 2012, an overall decrease of $10,818 in cash generated from operations year over year. The decrease is primarily due to slower cash collections. These slower collections are, in the opinion of management, attributed in part to the expired Grandfather Clause, a rule that allowed us to bill Medicare directly for in hospital laboratory work that was performed on Medicare patients even though the patient was in the hospital at the time the service was rendered. This exemption expired at the end of 2012 and starting in 2013 we were required to bill the hospital directly for such laboratory work instead of billing Medicare for it. As a consequence of this change collection cycle has increased and in some cases prices may have decreased. Another reason for slower collections is the change in the Blue Cross Blue Shield (BCBS) reimbursement practices whereby instead of billing BCBS for all of the laboratory services preformed nationwide on one bill we are now required to bill each local BCBS only for the services preformed based on the location where a patients sample was drawn. This new practice, also effective in 2013, significantly increased the complexity of our BCBS billing and collection processes. The company has since signed a number of local BCBS contracts and is presently diligently working on entering into such additional BCBS contracts.
Accounts receivable, net of allowance for doubtful accounts, totaled $176,438 at April 30, 2013, an increase of $23,191 or 15% from October 31, 2012. Cash collected during the three-month period ended April 30, 2013 increased 3% over the comparable prior year three-month period.
Credit risk with respect to accounts receivable is generally diversified due to the large number of patients and payers comprising our client base. We have significant receivable balances with government payors and various insurance carriers. Generally, we do not require collateral or other security to support customer receivables. However, we continually monitor and evaluate our client acceptance and collection procedures to minimize potential credit risks associated with our accounts receivable and establish an allowance for uncollectible accounts. As a consequence, we believe that our accounts receivable credit risk exposure beyond such allowance is not material.
A number of proposals for legislation continue to be under discussion that could substantially reduce Medicare and Medicaid reimbursements to clinical laboratories. Depending upon the nature of any regulatory action, and the content of legislation, we could experience a significant decrease in revenues from Medicare and Medicaid, which could have a material adverse effect on us. We are unable to predict, however, the extent of which such actions will be taken if at all.
Billing for laboratory services is complicated and we must bill various payors, such as the individual, the insurance company, the government (federal or state), the private company or the health clinic. Other factors that may complicate billing include:
Differences between fee schedules and actual reimbursement rates.
Incomplete or inaccurate billing information provided by physicians or clinics.
Disparity in coverage and information requirements.
Disputes with payors.
Internal and external compliance policies and procedures.
Significant costs are incurred as a result of our participation in government programs since billing and reimbursement for laboratory tests are subject to complex regulations. We perform the requested tests and report the results whether the billing information is correct or not or even missing. This adds to the complexity and slows the collection process and increases the aging of our accounts receivable (A/R). When patient invoices are not collected in a timely manner, the item is written off to the allowance. Days Sales Outstanding (DSO) for the period ended April 30, 2013 was 89 days, an increase of 1 day, or about 1%, from the 88 days that we reported for the period ended April 30, 2012, computed under the new method taking into account the change in presentation for patient service revenue provision for bad debts. Depending on the period in question, our actual collections represent between 98% and 102% of our net collectable revenues after giving effect to our DSO lag.
See Notes to our consolidated financial statements for the information on our short and long term debt.
We intend to expand our laboratory operations organically through marketing while also diversifying into related medical fields through acquisitions. These acquisitions may involve cash, notes, common stock and/or combinations thereof.
Tabular Disclosure of Contractual Obligations
|
|
Next Four Years and |
|
FY 2013 ($) |
|
Long-Term Debt |
|
4,627 |
|
458 |
|
Capital Leases |
|
5,395 |
|
1,200 |
|
Operating Leases |
|
15,250 |
|
7,127 |
|
Purchase Obligations |
|
91,073 |
|
23,758 |
|
Long-Term Liabilities under Employment and Consultant Contracts |
|
16,961 |
|
4,982 |
|
Our cash balance at April 30, 2013 totaled $25,538 as compared to $25,143 at October 31, 2012. We believe that our cash position, the anticipated cash generated from future operations and the availability of our credit line with PNC Bank will meet our anticipated cash needs for the next 12 months.
Impact of Inflation
To date, inflation has not had a material effect on our operations.
Critical Accounting Policies
The preparation of financial statements in conformity with U.S. 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 reported periods.
Accounting for Intangible and Other Long-Lived Assets
We evaluate the possible impairment of our long-lived assets, including intangible assets. We review the recoverability of our long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. Evaluation of possible impairment is based on our ability to recover the asset from the expected future pretax cash flows (undiscounted and without interest charges) of the related operations. If the expected undiscounted pretax cash flows are less than the carrying amount of such asset, an impairment loss is recognized for the difference between the estimated fair value and the carrying amount of the asset.
Accounting for Revenue
Service revenues are principally generated from laboratory testing services including chemical diagnostic tests such as blood analysis, urine analysis and genetic testing among others. Service revenues are recognized at the time the testing services are performed and are reported at their estimated net realizable amounts.
Service revenues before provision for bad debts are determined utilizing gross service revenues net of contractual adjustments and discounts. Even though it is the responsibility of the patient to pay for laboratory service bills, most individuals in the United States have an agreement with a third party payor such as Medicare, Medicaid or a commercial insurance provider to pay all or a portion of their healthcare expenses; the majority of services provided by Bio-Reference Laboratories, Inc. (BRLI) are to patients covered under a third party payor contract. In certain cases, the individual has no insurance or does not provide insurance information and in other cases tests are performed under contract to a professional organization (such as physicians, hospitals, and clinics) which reimburse BRLI directly; in the remainder of the cases, BRLI is provided the third party billing information and seeks payment from the third party under the terms and conditions of the third party payor for health service providers like BRLI. Each of these third party payors may differ not only with regard to rates, but also with regard to terms and conditions of payment and providing coverage (reimbursement) for specific tests. Estimated revenues are established based on a series of highly complex procedures and judgments that require industry specific healthcare experience and an understanding of payor methods and trends. We review our calculations on a monthly basis in order to make certain that we are properly allowing for the uncollectable portion of our gross billings due to the contractual adjustments and discounts and that our estimates remain sensitive to variances and changes within our payor groups. The contractual allowance calculation is made on the basis of historical allowance rates for the various specific payor groups on a monthly basis with a greater weight being given to the most recent trends; this process is adjusted based on recent changes in underlying contract provisions and shifts in the testing being performed. This calculation is routinely analyzed by BRLI on the basis of actual allowances issued by payors and the actual payments made to determine what adjustments, if any, are needed. The table below shows the adjustments made to gross service revenues to arrive at net revenues, the amount reported on our statement of operations
|
|
($) |
| ||||||
|
|
Three Months Ended |
|
Six Months Ended |
| ||||
|
|
April 30, |
|
April 30, |
| ||||
|
|
[Unaudited] |
|
[Unaudited] |
| ||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
Gross Service Revenues |
|
861,506 |
|
763,823 |
|
1,660,216 |
|
1,447,639 |
|
|
|
|
|
|
|
|
|
|
|
Contractual Adjustments and Discounts: |
|
|
|
|
|
|
|
|
|
Medicare/Medicaid Portion |
|
86,433 |
|
81,318 |
|
168,260 |
|
156,059 |
|
All Other Third Party Payors* |
|
584,211 |
|
519,117 |
|
1,127,496 |
|
978,273 |
|
Total Contractual Adjustments and Discounts |
|
670,644 |
|
600,435 |
|
1,295,756 |
|
1,134,332 |
|
Service Revenues Net of Contractual Adjustments and Discounts |
|
190,862 |
|
163,388 |
|
364,460 |
|
313,307 |
|
Patient Service Revenue Provision for Bad Debts** |
|
14,410 |
|
11,945 |
|
26,751 |
|
23,071 |
|
Net Revenues |
|
176,452 |
|
151,443 |
|
337,709 |
|
290,236 |
|
* All Other Third Party and Direct Payors consists of almost eight hundred distinct payors, including commercial health insurers and administrators as well as professionally billed accounts such as physicians, hospitals, clinics and other direct billed accounts.
** Represents the amount of Bad Debt Expense that is now required to be presented as a deduction from patient service revenue (net of contractual allowances and discounts) pursuant to ASU No. 2011-7.
When new business is received by BRLI, service revenues net of contractual adjustments and discounts are calculated by reducing gross service revenues by the estimated contractual allowance. The Patient Service Revenue Provision for Bad Debts represents the amount of bad debt expense expected to occur on patient service revenue based upon our experience. The remaining bad debt expense is presented as part of operating expenses. The bad debt expense presented as part of operating expense represents the bad debt expense related to receivables from service revenues determined after taking into account our ability to collect on such revenue.
BRLI recognized the amounts in subsequent periods for actual allowances/discounts to gross service revenue; bad debt may have been adjusted over the same periods of time to maintain an accurate balance between net revenues and actual revenues. Management has reviewed the allowances/discounts recognized in subsequent periods and believes the amounts to be immaterial. A number of proposals for legislation or regulation continue to be under
discussion which could have the effect of substantially reducing Medicare reimbursements for clinical laboratories or introducing cost sharing to beneficiaries. 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.
It is typically the responsibility of the patient to pay for laboratory service bills. Most individuals in the United States have an agreement with a third party payor such as Medicare, Medicaid or commercial insurance to pay all or a portion of their healthcare expenses; this represents the major portion of payment for all services provided by BRLI. In certain cases, the individual has no insurance or does not provide insurance information; in the remainder of the cases, BRLI is provided the third party billing information, usually by the referring physician, and seeks payment from the third party under the terms and conditions of the third party payor for health service providers like BRLI. Each of these third party payors may differ not only with regard to rates, but also with regard to terms and conditions of payment and coverage of specific tests. BRLI routinely reviews the reimbursement policies and subsequent payments and collection rates from these different types of payors. Contractual adjustments and discounts are recorded as reductions to gross service revenues and are collectively referred to as the contractual allowance. BRLI has not been required to record an adjustment in a subsequent period related to revenue recorded in a prior period which was material in nature. Aging of accounts receivable is monitored by billing personnel and follow-up activities including collection efforts are conducted as necessary. BRLI writes off receivables against the allowance for doubtful accounts when they are deemed uncollectible. For client billing, accounts are written off when all reasonable collection efforts prove to be unsuccessful. Patient accounts, where the patient is directly responsible for all or a remainder portion of the account after partial payment or denial by a third party payor, are written off after the normal dunning cycle has occurred, although these may be subsequently transferred to a third party collection agency after being written off. Third party payor accounts are written off when they exceed the payers timely filing limits. Accounts Receivable on the balance sheet is net of the following amounts for contractual credits and doubtful accounts:
|
|
($) |
| ||
|
|
[Unaudited] |
|
|
|
|
|
April 30, |
|
October 31, |
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
|
Contractual Credits/Discounts |
|
336,642 |
|
267,921 |
|
Doubtful Accounts |
|
56,636 |
|
51,274 |
|
Total Allowance |
|
393,278 |
|
319,195 |
|
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK [Not in Thousands]
We do not invest in or trade instruments that are sensitive to market risk. We also do not have any material foreign operations or foreign sales so we have no exposure to foreign currency exchange rate risk.
We do have exposure to both rising and falling interest rates. At April 30, 2013, advances of approximately $9,377,000 under our Loan Agreement with PNC Bank were subject to interest charges at the banks then prime rate of 3.50%.
We estimate that our monthly cash interest expense at April 30, 2013 was approximately $122,000 and that a one percentage point increase or decrease in short-term rates would increase or decrease our monthly interest expense by approximately $19,000.
Item 4 CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, as to the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and our principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC forms and rules, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
There have been no changes in our internal control over financial reporting during the fiscal quarter ended April 30, 2013 that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
BIO-REFERENCE LABORATORIES, INC.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The table below sets forth information regarding repurchases of our common stock by us during the quarter ended April 30, 2013:
Period |
|
(a) Total Number |
|
(b) Average |
|
(c) Total Number of |
|
(d) Maximum |
|
|
|
|
|
($) |
|
|
|
|
|
Q2 Month #2 (3/07/2013 to 3/31/2013) |
|
15,000 |
|
27.92 |
|
15,000 |
|
699,550 |
|
Q3 Month #3 (4/1/2013 to 4/30/2013) |
|
66,600 |
|
24.20 |
|
66,600 |
|
632,950 |
|
Total |
|
367,050 |
|
|
|
367,050 |
|
|
|
*** On November 11, 2011, we announced that our board of directors approved a Stock Repurchase Program authorizing the repurchase of up to 1,000,000 shares of our common stock at prevailing market prices over the period ending October 31, 2012 that was subsequently extended to the period ending October 31, 2013. 285,450 shares have been repurchased under the plan in prior fiscal year.
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification Pursuant to 18 U.S.C. Section 1350 of Chief Executive Officer
32.2 Certification Pursuant to 18 U.S.C. Section 1350 of Chief Financial Officer
101 Interactive Data File
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 M.D. |
|
Marc D. Grodman, M.D. |
|
President and Chief Executive Officer |
|
|
|
|
|
/S/ Sam Singer |
|
Sam Singer |
|
Chief Financial and Accounting Officer |
|
|
|
|
Date: June 7, 2013 |
|
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Marc D. Grodman, certify that:
1. I have reviewed this report on Form 10-Q of Bio-Reference Laboratories, Inc. (the registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants second quarter) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Dated: June 7, 2013
|
/S/ Marc D. Grodman M.D. |
|
Marc D. Grodman |
|
Chief Executive Officer |
|
Principal Executive Officer |
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Sam Singer, certify that:
1. I have reviewed this report on Form 10-Q of Bio-Reference Laboratories, Inc. (the registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants second quarter ) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Dated: June 7, 2013
|
/S/ Sam Singer |
|
Sam Singer |
|
Chief Financial Officer |
|
Principal Financial and Accounting Officer. |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, Marc D. Grodman, Chief Executive Officer of Bio-Reference Laboratories, Inc. (the registrant), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(a) The Periodic Report on Form 10-Q of the registrant for the period ended April, 30 2013, which this certification accompanies (the Periodic Report), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(b) Based on my knowledge, the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
Dated: June 7, 2013
|
/S/ Marc D. Grodman M.D. |
|
Marc D. Grodman |
|
Chief Executive Officer |
|
Principal Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, Sam Singer, Chief Financial Officer of Bio-Reference Laboratories, Inc. (the registrant), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(a) The Periodic Report on Form 10-Q of the registrant for the period ended April 30th 2013, which this certification accompanies (the Periodic Report), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(b) Based on my knowledge, the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
Dated: June 7, 2013
|
/S/ Sam Singer |
|
Sam Singer |
|
Chief Financial Officer |
|
Principal Financial and Accounting Officer. |
Accounting for Revenues (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2013
|
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Accounting for Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of adjustments made to gross service revenues to arrive at net revenues |
* All Other Third Party and Direct Payors consists of almost eight hundred distinct payors, including commercial health insurers and administrators as well as professionally billed accounts such as physicians, hospitals, clinics and other direct billed accounts.
** Represents the amount of Bad Debt Expense that is now required to be presented as a deduction from patient service revenue (net of contractual allowances and discounts) pursuant to ASU No. 2011-7. |
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 30, 2013
|
Apr. 30, 2012
|
Apr. 30, 2013
|
Apr. 30, 2012
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
NET REVENUES: | $ 176,452 | $ 151,443 | $ 337,709 | $ 290,236 |
COST OF SERVICES: | ||||
Depreciation and Amortization | 3,777 | 3,265 | 7,316 | 6,274 |
Employee Related Expenses | 41,824 | 36,811 | 81,883 | 71,250 |
Reagents and Laboratory Supplies | 33,767 | 29,546 | 65,477 | 57,325 |
Other Cost of Services | 16,408 | 14,287 | 31,435 | 27,735 |
TOTAL COST OF SERVICES | 95,776 | 83,909 | 186,111 | 162,584 |
GROSS PROFIT ON REVENUES | 80,676 | 67,534 | 151,598 | 127,652 |
GENERAL AND ADMINISTRATIVE EXPENSES: | ||||
Depreciation and Amortization | 983 | 881 | 1,892 | 1,723 |
General and Administrative Expenses | 43,812 | 39,772 | 85,453 | 76,616 |
Bad Debt Expense | 15,172 | 10,110 | 27,785 | 19,258 |
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES | 59,967 | 50,763 | 115,130 | 97,597 |
INCOME FROM OPERATIONS | 20,709 | 16,771 | 36,468 | 30,055 |
OTHER (INCOME) EXPENSE: | ||||
Interest Expense | 434 | 412 | 733 | 771 |
Interest Income | (24) | (42) | (59) | (84) |
Other (Income) Expense | 104 | 0 | 225 | 0 |
TOTAL OTHER (INCOME) EXPENSES - NET | 514 | 370 | 899 | 687 |
INCOME BEFORE INCOME TAXES | 20,195 | 16,401 | 35,569 | 29,368 |
Provision for Income Taxes | 8,857 | 7,095 | 15,566 | 12,697 |
NET INCOME | $ 11,338 | $ 9,306 | $ 20,003 | $ 16,671 |
NET INCOME PER COMMON SHARE - BASIC: (in dollars per share) | $ 0.41 | $ 0.34 | $ 0.72 | $ 0.60 |
WEIGHTED AVERAGE NUMBER OF SHARES - BASIC: (in shares) | 27,698,146 | 27,684,715 | 27,707,241 | 27,786,216 |
NET INCOME PER COMMON SHARE - DILUTED: (in dollars per share) | $ 0.41 | $ 0.33 | $ 0.72 | $ 0.60 |
WEIGHTED AVERAGE NUMBER OF SHARES - DILUTED: (in shares) | 27,879,448 | 27,877,697 | 27,891,431 | 27,960,069 |
Accounting for Accounts Receivable
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2013
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Accounting for Accounts Receivable | ||||||||||||||||||||||||||||||||||||||||||||||||
Accounting for Accounts Receivable | [5] It is typically the responsibility of the patient to pay for laboratory service bills. Most individuals in the United States have an agreement with a third party payor such as Medicare, Medicaid or commercial insurance to pay all or a portion of their healthcare expenses; this represents the major portion of payment for all services provided by BRLI. In certain cases, the individual has no insurance or does not provide insurance information; in the remainder of the cases, BRLI is provided the third party billing information, usually by the referring physician, and seeks payment from the third party under the terms and conditions of the third party payor for health service providers like BRLI. Each of these third party payors may differ not only with regard to rates, but also with regard to terms and conditions of payment and coverage of specific tests. BRLI routinely reviews the reimbursement policies and subsequent payments and collection rates from these different types of payors. Contractual adjustments and discounts are recorded as reductions to gross service revenues and are collectively referred to as the contractual allowance. BRLI has not been required to record an adjustment in a subsequent period related to revenue recorded in a prior period which was material in nature. Aging of accounts receivable is monitored by billing personnel and follow-up activities including collection efforts are conducted as necessary. BRLI writes off receivables against the allowance for doubtful accounts when they are deemed uncollectible. For client billing, accounts are written off when all reasonable collection efforts prove to be unsuccessful. Patient accounts, where the patient is directly responsible for all or a remainder portion of the account after partial payment or denial by a third party payor, are written off after the normal dunning cycle has occurred, although these may be subsequently transferred to a third party collection agency after being written off. Third party payor accounts are written off when they exceed the payer’s timely filing limits. Accounts Receivable on the balance sheet is net of the following amounts for contractual credits and doubtful accounts:
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Revolving Note Payable - Bank (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | 6 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2013
|
Oct. 31, 2012
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Apr. 30, 2013
Revolving note payable - bank
|
Apr. 30, 2013
Revolving note payable - bank
Bank's base rate
|
Apr. 30, 2013
Revolving note payable - bank
Bank's base rate
Minimum
|
Apr. 30, 2013
Revolving note payable - bank
Bank's base rate
Maximum
|
Apr. 30, 2013
Revolving note payable - bank
Eurodollar rate
|
Apr. 30, 2013
Revolving note payable - bank
Eurodollar rate
Minimum
|
Apr. 30, 2013
Revolving note payable - bank
Eurodollar rate
Maximum
|
|
Revolving note payable - Bank | |||||||||
Maximum amount of the credit line available pursuant to the loan agreement | $ 45,000 | ||||||||
Maximum credit line available as percentage of accounts receivable | 50.00% | ||||||||
Variable rate basis | base rate | Eurodollar rate | |||||||
Percentage of additional interest | 1.00% | 4.00% | 1.00% | 4.00% | |||||
Variable rate of interest (as a percent) | 3.50% | ||||||||
Amount of credit utilized | $ 9,377 | $ 0 | $ 9,377 |
Accounting for Accounts Receivable (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2013
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Accounting for Accounts Receivable | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of amounts for contractual credits and doubtful accounts |
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Acquisitions (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 30, 2013
Item
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Apr. 30, 2013
Autos
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Apr. 30, 2013
Medical Equipment
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Apr. 30, 2013
Computer Equipment
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Apr. 30, 2013
Leasehold improvements
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Apr. 30, 2013
Non-Compete Agreement
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Apr. 30, 2013
Customer Relationships in Place
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Dec. 31, 2012
FCL
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Dec. 31, 2012
FCL
Autos
|
Dec. 31, 2012
FCL
Medical Equipment
|
Dec. 31, 2012
FCL
Computer Equipment
|
Dec. 31, 2012
FCL
Leasehold improvements
|
Dec. 31, 2012
FCL
Non-Compete Agreement
|
Dec. 31, 2012
FCL
Customer Relationships in Place
|
Dec. 21, 2012
MCL
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Dec. 21, 2012
MCL
Autos
|
Dec. 21, 2012
MCL
Medical Equipment
|
Dec. 21, 2012
MCL
Non-Compete Agreement
|
Dec. 21, 2012
MCL
Customer Relationships in Place
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Acquisitions | |||||||||||||||||||
Number of businesses acquired | 2 | ||||||||||||||||||
Acquisitions | |||||||||||||||||||
Accounts Receivable | $ 1,240 | $ 1,008 | $ 232 | ||||||||||||||||
Property, plant and equipment | 185 | 228 | 21 | 53 | 137 | 225 | 21 | 53 | 48 | 3 | |||||||||
Other Non-Current Assets | 3 | 3 | |||||||||||||||||
Intangible assets | 790 | 4,165 | 747 | 3,235 | 43 | 930 | |||||||||||||
Deposits | 2 | 2 | |||||||||||||||||
Goodwill | 2,578 | 1,905 | 673 | ||||||||||||||||
Accounts Payable | 201 | 118 | 83 | ||||||||||||||||
Long Term Debt (Auto-Loans) | 200 | 200 | 0 | ||||||||||||||||
Short Term Acquisition Payable | $ 1,250 | $ 1,000 | $ 250 |
Provision for Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Apr. 30, 2013
|
Apr. 30, 2012
|
Apr. 30, 2013
|
Apr. 30, 2012
|
Oct. 31, 2012
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Provision for Income Taxes | |||||
Current tax provision | $ 12,114 | $ 8,398 | $ 18,601 | $ 14,940 | |
Deferred tax provision (benefit) | 3,257 | 1,302 | (3,036) | (2,243) | |
Current deferred tax asset | 27,446 | 23,438 | 27,446 | 23,438 | 24,912 |
Long-term deferred tax asset | $ 2,780 | $ 2,357 | $ 2,780 | $ 2,357 | $ 2,278 |
Long-Term Debt - Bank (Details) (Seven-year term note, USD $)
In Thousands, unless otherwise specified |
1 Months Ended | 6 Months Ended |
---|---|---|
Dec. 31, 2010
|
Apr. 30, 2013
Item
|
|
Seven-year term note
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Long-term debt | ||
Term of debt | 7 years | |
Debt issued | $ 5,408 | |
Debt instrument interest rate (as a percent) | 6.12% | |
Number of equal monthly installments | 84 | |
Monthly installment including principal and interest | 61 | |
Debt outstanding | $ 4,399 |
Basis of Presentation
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6 Months Ended |
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Apr. 30, 2013
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Basis of Presentation | |
Basis of Presentation | [1] Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for complete audited financial statements. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in these statements. Interim results are not necessarily indicative of results for a full year. Reference is made to the October 31, 2012 audited consolidated financial statements of Bio-Reference Laboratories, Inc. contained in its Annual Report on Form 10-K for the year ended October 31, 2012.
The consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes for the year ended October 31, 2012 as filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K. Significant accounting policies followed by the Company are set forth in Note 2 to the Company’s 2012 Annual Report on Form 10-K. |
Recent Accounting Pronouncements
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6 Months Ended |
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Apr. 30, 2013
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Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | [3] Certain prior year amounts have been reclassified to conform to the current year presentation. The Company adopted Accounting Standard Update (“ASU”) No. 2011-7: Health Care Entities (Topic 954) — Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities commencing with the current fiscal year, the first year such standard is required for the Company. The adoption of this update did not have a material impact on the Company’s financial statements.
Although this update does not have a material impact on the Company’s financial statements as a whole, it requires that we adjust our presentation of our statement of operations along with prior periods presented in this report to maintain comparability. As the result of this change in presentation, our “Net Revenues”, “Gross Profit on Revenues” and our “General and Administrative Expenses” would change while our “Operating Income”, “Net Income” and “Earnings per Share” will remain the same. The presentation is adjusted for a portion of our “Bad Debt Expense” that is now reported in our Net Revenues as required under ASU No. 2011-7. |
Intangible Assets
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2013
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Intangible Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | [6] The following disclosures present certain information on the Company’s intangible assets as of April 30, 2013 (Unaudited) and October 31, 2012. All intangible assets are being amortized over their estimated useful lives, as indicated below, with no estimated residual value.
April 30, 2013
October 31, 2012
The aggregate intangible amortization expense for the three months ended April 30, 2013 and 2012 was $227 and $156, respectively. The aggregate intangible amortization expense for the six-months ended April 30, 2013 and 2012 was $367 and $299, respectively. The estimated intangible asset amortization expense for the fiscal year ending October 31, 2013 and for the four subsequent years is as follows:
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Accounting for Revenues
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 30, 2013
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Accounting for Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting for Revenues | [4] Service revenues are principally generated from laboratory testing services including chemical diagnostic tests such as blood analysis, urine analysis and genetic testing among others. Service revenues are recognized at the time the testing services are performed and are reported at their estimated net realizable amounts.
Service revenues before provision for bad debts are determined utilizing gross service revenues net of contractual adjustments and discounts. Even though it is the responsibility of the patient to pay for laboratory service bills, most individuals in the United States have an agreement with a third party payor such as Medicare, Medicaid or a commercial insurance provider to pay all or a portion of their healthcare expenses; the majority of services provided by Bio-Reference Laboratories, Inc. (“BRLI”) are to patients covered under a third party payor contract. In certain cases, the individual has no insurance or does not provide insurance information and in other cases tests are performed under contract to a professional organization (such as physicians, hospitals, and clinics) which reimburse BRLI directly; in the remainder of the cases, BRLI is provided the third party billing information and seeks payment from the third party under the terms and conditions of the third party payor for health service providers like BRLI. Each of these third party payors may differ not only with regard to rates, but also with regard to terms and conditions of payment and providing coverage (reimbursement) for specific tests. Estimated revenues are established based on a series of highly complex procedures and judgments that require industry specific healthcare experience and an understanding of payor methods and trends. We review our calculations on a monthly basis in order to make certain that we are properly allowing for the uncollectable portion of our gross billings due to the contractual adjustments and discounts and that our estimates remain sensitive to variances and changes within our payor groups. The contractual allowance calculation is made on the basis of historical allowance rates for the various specific payor groups on a monthly basis with a greater weight being given to the most recent trends; this process is adjusted based on recent changes in underlying contract provisions and shifts in the testing being performed. This calculation is routinely analyzed by BRLI on the basis of actual allowances issued by payors and the actual payments made to determine what adjustments, if any, are needed. The table below shows the adjustments made to gross service revenues to arrive at net revenues, the amount reported on our statement of operations.
* All Other Third Party and Direct Payors consists of almost eight hundred distinct payors, including commercial health insurers and administrators as well as professionally billed accounts such as physicians, hospitals, clinics and other direct billed accounts.
** Represents the amount of Bad Debt Expense that is now required to be presented as a deduction from patient service revenue (net of contractual allowances and discounts) pursuant to ASU No. 2011-7.
When new business is received by BRLI, service revenues net of contractual adjustments and discounts are calculated by reducing gross service revenues by the estimated contractual allowance. The Patient Service Revenue Provision for Bad Debts represents the amount of bad debt expense expected to occur on patient service revenue based upon our experience. The remaining bad debt expense is presented as part of operating expenses. The bad debt expense presented as part of operating expense represents the bad debt expense related to receivables from service revenues determined after taking into account our ability to collect on such revenue.
BRLI recognized the amounts in subsequent periods for actual allowances/discounts to gross service revenue; bad debt may have been adjusted over the same periods of time to maintain an accurate balance between net revenues and actual revenues. Management has reviewed the allowances/discounts recognized in subsequent periods and believes the amounts to be immaterial. A number of proposals for legislation or regulation continue to be under discussion which could have the effect of substantially reducing Medicare reimbursements for clinical laboratories or introducing cost sharing to beneficiaries. 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. |
Common Stock Repurchase (Details) (USD $)
In Thousands, except Share data, unless otherwise specified |
6 Months Ended | |
---|---|---|
Apr. 30, 2013
|
Nov. 11, 2011
|
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Common Stock Repurchase | ||
Number of shares of common stock authorized to be repurchased | 1,000,000 | |
Number of shares of common stock repurchased | 81,600 | |
Cost of shares of common stock repurchased | $ 2,030 |
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