-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UvOVbvS2W0Y4ZWiCTWQa+IE6VlWMZuJzSJcN4srSo41nruiyGmIAqPkgzHWkHyon DG8wOBtN1mhmbRvWHrIOmA== 0000881917-96-000009.txt : 19960806 0000881917-96-000009.hdr.sgml : 19960806 ACCESSION NUMBER: 0000881917-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960805 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMT HEALTH SERVICES INC CENTRAL INDEX KEY: 0000881917 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 251672183 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19897 FILM NUMBER: 96603669 BUSINESS ADDRESS: STREET 1: 10521 PERRY HIGHWAY CITY: WEXFORD STATE: PA ZIP: 15090 BUSINESS PHONE: 4129333300 MAIL ADDRESS: STREET 1: 10521 PERRY HIGHWAY CITY: WEXFORD STATE: PA ZIP: 15090 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 X Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to _________ Commission File No.: 0-19897 SMT HEALTH SERVICES INC. (Exact name of registrant as specified in its charter) DELAWARE 25-1672183 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10521 PERRY HIGHWAY, WEXFORD, PENNSYLVANIA 15090 (Address of principal executive offices) 412-933-3300 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At July 29, 1996, 3,154,272 shares of Common Stock, $0.01 par value of the registrant were outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements SMT Health Services Inc. and Subsidiaries Consolidated Balance Sheets (unaudited)
June 30, December 31, 1996 1995 ------------ ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents - unrestricted $ 2,560,495 $ 2,341,519 Cash and cash equivalents - restricted (Note 4) 1,270,000 1,600,000 Accounts receivable - no allowance for doubtful accounts 1,402,074 1,059,567 Accounts receivable, other, net of allowance for doubtful accounts of $20,000 at December 31, 1995 -- 74,455 Notes receivable - current portion 49,950 47,760 Receivable from the sale of leases secured by equipment - current portion 365,178 342,789 Other current assets 354,612 175,506 ----------- ---------- Total current assets 6,002,309 5,641,596 ----------- ----------- PROPERTY AND EQUIPMENT: Equipment 203,805 174,556 Furniture and fixtures 60,874 59,712 Vehicles 156,549 125,103 Leasehold improvements 29,245 27,915 Leased medical equipment 27,232,305 22,167,551 ----------- ----------- Total property and equipment 27,682,778 22,554,837 Less accumulated depreciation and amortization (6,655,058) (6,613,759) ----------- ----------- Property and equipment, net 21,027,720 15,941,078 ----------- ----------- OTHER ASSETS: Notes receivable - noncurrent 26,706 52,240 Receivable from the sale of leases secured by equipment - noncurrent 690,227 878,590 Contract and license acquisition costs, net of accumulated amortization of $837,000 and $788,000, respectively 673,513 109,260 Deposits and other assets 423,957 506,041 Deferred income taxes, net of valuation allowance of $103,000 at December 31, 1995 -- 219,000 ----------- ----------- Total other assets 1,814,403 1,765,131 ----------- ----------- TOTAL ASSETS $28,844,432 $23,347,805 =========== ===========
See Notes to Consolidated Financial Statements. -2- SMT Health Services Inc. and Subsidiaries Consolidated Balance Sheets (unaudited) (continued)
June 30, December 31, 1996 1995 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 221,574 $ 270,277 Accrued wages and related taxes 70,689 57,823 Current portion of long-term debt and capital lease obligations 5,285,242 4,380,930 Other current liabilities 522,846 527,217 ------------ ------------ Total current liabilities 6,100,351 5,236,247 Deferred income taxes 140,000 -- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS - less current portion 15,237,130 12,709,905 ------------ ------------ Total liabilities 21,477,481 17,946,152 ------------ ------------ STOCKHOLDERS' EQUITY: Common Stock, $0.01 par value; authorized 10,000,000 shares; issued and outstanding 3,120,100 and 2,654,400, respectively 31,201 26,544 Cumulative Convertible Preferred Stock; $0.01 par value;authorized 994,600 shares; no shares issued and outstanding -- -- Additional paid-in capital 7,576,235 6,636,070 Accumulated deficit (240,485) (1,260,961) ------------ ------------ Total Stockholders' equity 7,366,951 5,401,653 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28,844,432 $23,347,805 ============ ============
See Notes to Consolidated Financial Statements. -3- SMT Health Services Inc. and Subsidiaries Consolidated Statements of Operations (unaudited)
Three Months Three Months Ended Ended June 30, 1996 June 30, 1995 ---------- ---------- REVENUES: Service revenue $4,596,571 $3,851,784 Interest income 31,104 28,095 ---------- ---------- Total revenues 4,627,675 3,879,879 ---------- ---------- COSTS AND EXPENSES: Operating expenses - third parties 1,524,754 1,411,027 Operating expenses - lease expenses - related parties -- 76,449 Depreciation and amortization 1,119,823 919,897 Selling, general and administrative 690,967 598,235 Interest - third parties 489,136 451,179 ---------- ---------- Total costs and expenses 3,824,680 3,456,787 ---------- ---------- Income before income taxes, minority interests and gain on sale 802,995 423,092 Minority interests in earnings of subsidiaries (Note 7) -- 22,815 ---------- ---------- Income before income taxes and gain on sale 802,995 400,277 Gain on sale of partnership interests -- 48,219 ---------- ---------- Income before income taxes 802,995 448,496 Income taxes 240,000 119,000 ---------- ---------- Net income $ 562,995 $ 329,496 ========== ========== Earnings per Common Share $ .15 $ .12 ========== ========== Weighted Average Shares outstanding (Note 2) 2,802,000 2,528,400 ========== ==========
See Notes to Consolidated Financial Statements. -4- SMT Health Services Inc. and Subsidiaries Consolidated Statements of Operations (unaudited)
Six Months Six Months Ended Ended June 30, 1996 June 30, 1995 ---------- ---------- REVENUES: Service revenue $8,724,606 $7,496,549 Interest income 84,270 46,905 ---------- ---------- Total revenues 8,808,876 7,543,454 ---------- ---------- COSTS AND EXPENSES: Operating expenses - third parties 2,890,727 2,699,262 Operating expenses - lease expenses - related parties -- 154,849 Depreciation and amortization 2,108,997 1,856,407 Selling, general and administrative 1,373,233 1,162,794 Interest - third parties 946,443 802,813 Interest - related parties -- 86,538 ---------- ---------- Total costs and expenses 7,319,400 6,762,663 ---------- ---------- Income before income taxes, minority interests and gain on sale 1,489,476 780,791 Minority interests in earnings of subsidiaries (Note 7) -- 49,906 ---------- ---------- Income before income taxes and gain on sale 1,489,476 730,885 Gain on sale of partnership interests -- 48,219 ---------- ---------- Income before income taxes 1,489,476 779,104 Income taxes 469,000 208,000 ---------- ---------- Net income from continuing operations 1,020,476 571,104 ---------- ---------- Discontinued operations: Loss on disposal of discontinued operations, net of tax benefit of $102,000 in 1995 -- (198,000) Extraordinary item, debt forgiveness, net of income tax expense of $102,000 -- 198,000 ---------- ---------- -- -- ---------- ---------- Net Income $ 1,020,476 $ 571,104 ========== ========== Earnings per Common Share: Continuing operations $ .29 $ .22 Discontinued operations -- -- ---------- ---------- Earnings Per Common Share $ .29 $ .22 ========== ========== Weighted Average Shares outstanding (Note 2) 2,728,000 2,528,400 ========== ==========
See Notes to Consolidated Financial Statements. -5- SMT Health Services Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited)
Six Months Six Months Ended Ended June 30, 1996 June 30, 1995 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,020,476 $ 571,104 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,108,997 1,856,407 Minority interests in subsidiaries -- 49,906 Negative amortization on capital lease obligations -- 5,521 Deferred income taxes 359,000 145,000 Gain on sale of partnership interests -- (48,219) Other -- 10,467 Changes in assets and liabilities of continuing operations: Accounts and notes receivable (244,708) (197,075) Other current assets (179,106) (5,196) Accounts payable and other (53,075) 98,129 Accrued wages and related taxes 12,866 (3,764) ---------- ---------- NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES 3,024,450 2,482,280 ---------- ---------- NET CASH USED IN DISCONTINUED OPERATING ACTIVITIES -- (64,264) ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 3,024,450 2,418,016 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (1,389,258) (124,616) Construction of leasehold improvements (1,330) (7,435) Payment for purchase of acquired entity (642,840) -- Net change in cash restricted for equipment financing purposes 330,000 -- Net cash received for sale of partnership interests -- 122,854 Net cash received for sale of discontinued entities -- 110,000 Other 66,450 (81,056) ---------- ---------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,636,978) 19,747 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments under loan agreements and capital leases: Continuing operations: Related parties -- (1,481,351) Third parties (2,113,318) (329,627) Discontinued operations -- (27,807) Issuance of Common Stock from exercise of stock options 944,822 -- Other -- (1,649) ---------- ---------- NET CASH USED IN FINANCING ACTIVITIES (1,168,496) (1,840,434) ---------- ----------
See Notes to Consolidated Financial Statements. -6- SMT Health Services Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (continued)
Six Months Six Months Ended Ended June 30, 1996 June 30, 1995 ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS - (unrestricted) $ 218,976 $ 597,329 CASH AND CASH EQUIVALENTS - (unrestricted) - Beginning of period 2,341,519 717,004 ---------- ---------- CASH AND CASH EQUIVALENTS - (unrestricted) - End of period $ 2,560,495 $ 1,314,333 ========== ==========
See Notes to Consolidated Financial Statements. -7- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 NOTE 1 - BASIS OF PRESENTATION SMT Health Services Inc. and its wholly owned subsidiaries (the "Company") are engaged primarily in providing medical diagnostic imaging services to hospitals, physicians and patients. The Company, through its subsidiaries, currently operates fourteen mobile Magnetic Resonance Imaging (MRI) Units ("MRI Units") in Pennsylvania, West Virginia, North Carolina, Virginia, Kentucky and Ohio. The Company's Common Stock and Warrants currently trade on the National Association of Securities Dealers, Inc. Automated Quotations Systems (NASDAQ) National Market System under the symbols "SHED" and "SHEDW", respectively. The unaudited consolidated financial statements as of and for the three and six month periods ended June 30, 1996 and 1995 include the accounts of the Company and its majority and wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements included herein have been prepared by management in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures which are normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with SEC informational requirements. The financial statements reflect normal recurring accounting adjustments which, in the opinion of management are necessary for a fair presentation of the financial position and results of operations for the interim period. The results of operations for the three and six month periods ended June 30, 1996 are not necessarily indicative of the results for the entire current fiscal year ending December 31,1996. The consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Form 10-K/A (Amendment No. 1) for the year ended December 31, 1995 which is on file at the Securities and Exchange Commission. Certain amounts in the June 30, 1995 Statements of Operations and Cash Flows have been reclassified to conform with the June 30, 1996 presentation. -8- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) JUNE 30, 1996 NOTE 2 - NET EARNINGS PER COMMON AND COMMON SHARE EQUIVALENT The net earnings per common and common share equivalent are calculated using the weighted average common and common share equivalents outstanding during the year, except where anti-dilutive. Common share equivalents include shares issuable upon the exercise of stock options, rights and warrants less the number of shares assumed purchased with the proceeds available from the assumed exercise of the options, rights and warrants. The Treasury Stock Method of reflecting use of proceeds from options and warrants may not adequately reflect potential dilution if options and warrants to acquire a substantial number of Common Shares (greater than 20% of the number of Common Shares outstanding for the period for which the computation is being made) are outstanding. In such instances, the Modified Treasury Stock Method must be utilized. The Company's options and warrants to acquire Common Shares exceed 20% and accordingly, the Treasury Stock Method has been modified in determining the dilutive effect of the options and warrants on earnings per share data. Fully diluted earnings per common share are anti-dilutive and, accordingly, are not presented. NOTE 3 - CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES The Company is engaged primarily in providing mobile MRI services to small-to-medium-sized hospitals in Pennsylvania, West Virginia, North Carolina, Virginia, Kentucky and Ohio. -9- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) JUNE 30, 1996 NOTE 3 - CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES (Continued) The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain Significant Estimates: The Company operates mobile MRI units which are capital intensive and subject to changes in technology. The Company primarily leases such equipment over a 48 to 60 month period and depreciates the equipment over the respective lease period to an estimated residual value which typically approximates 20% of the original cost of the equipment. The useful lives and residual values estimated by management are considered significant estimates. During the past twenty-four months, the Company upgraded its fleet of mobile MRI units to newer state-of-the-art technology. Management does not currently anticipate significant technological advances which could significantly affect its estimates. The Company is not dependent on any one customer or geographic region as a source of its revenues. However, the Company utilizes the services of Hospital Shared Services to process approximately 30% of its billings and collections. NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS Long-term debt and capital lease obligations consist of the following:
June 30, December 31, 1996 1995 ---------- ---------- Capital lease and loan obligations $20,522,372 $17,090,835 Less current portion 5,285,242 4,380,930 ---------- ---------- $15,237,130 $12,709,905 ========== ==========
-10- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) JUNE 30, 1996 NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Continued) The total cost and accumulated amortization of property securing capital lease and loan obligations at June 30, 1996 were approximately $27,235,000 and $6,434,000, respectively. Interest rates under the capital leases and loan obligations range from 8.5% to 13.5%. In February and March 1995, the Company refinanced four Mobile Units to more favorable lease terms. The long-term debt and capital lease obligations balance includes approximately $1.0 million of capital lease obligations due to third parties related to the equipment at the Auburn Regional Center for Cancer Care and Airport Regional Imaging Center, which the Company had treated as discontinued operations and sold in October 1994 and June 1995, respectively. Accordingly, the Company has recorded an offsetting receivable for the lease receivables due from the purchasers of the centers. Such lease receivables are secured by the equipment and accounts receivable of the centers. In November 1992, the Company issued a letter-of-credit in the amount of $198,500 pursuant to a lease transaction related to the Airport Regional Imaging Center. In exchange for restructuring the terms of the debt of this Center, the Company increased the outstanding letter-of-credit to an aggregate $400,000. In November 1994, the Company issued a letter-of-credit in the amount of $270,000 related to the purchase and financing of a new Mobile Unit. Such letter-of-credit is scheduled to be reduced at various times beginning in 1997. In relation to the refinancing of the Mobile Units in February and March 1995, the Company issued two letters-of-credit in the aggregate amount of $930,000. In February 1996, the lessor holding one of the letters-of -credit totaling $330,000 allowed the letter-of-credit to expire. -11- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) JUNE 30, 1996 NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Continued) On July 31, 1996, the Company refinanced two MRI units which had previously been refinanced in March 1995 to more favorable lease terms. The new leases total approximately $2.3 million (net of a $150,000 down payment) in the aggregate and are being financed over a thirty-six month period at an interest rate of 9.25%. The refinancing will result in annual cash flow savings to the Company of approximately $200,000. As a result of this refinancing, the $600,000 letter-of-credit which had been issued in March 1995 has been terminated. The Company must maintain a cash balance on deposit with the bank which issued the letters-of-credit equal to the outstanding letters-of-credit. At June 30, 1996, the cash balance required to be on deposit totaled $1,270,000. As a result of the aforementioned refinancing, the cash balance required to be on deposit was reduced to $670,000 in July 1996. In February 1995, the Company purchased an eighteen-month-old Siemens 1.0 Tesla Impact Mobile Unit for approximately $1.2 million. The Company financed the purchase of this unit under a 48 month dollar-out lease requiring monthly payments of approximately $31,000. In June 1995, the Company upgraded one of its .5 Tesla General Electric Signas to a 1.0 Tesla Signa for approximately $1.9 million. The Company financed the purchase of this unit with a 60 month dollar-out capital lease requiring monthly payments of approximately $41,000. In September 1995, the Company purchased a new unit for approximately $1.9 million. The Company financed the purchase of this new unit with a 60 month loan requiring monthly payments of approximately $40,000. The Company upgraded one of its .5 Tesla Signas to a 1.0 Tesla Horizon unit. The new unit was financed at a net total cost of approximately $2.0 million and was delivered in late February 1996. The Company financed the purchase of this new unit with a 60 month dollar-out lease requiring monthly payments of approximately $44,000. -12- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) JUNE 30, 1996 NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Continued) The Company contracted with several new hospital clients and purchased a new Siemens 1.0 Tesla Impact unit which began service in mid-February 1996. The cost of this new unit approximated $1.9 million. The Company financed the purchase of this new unit with a 60 month loan requiring monthly payments of approximately $35,000. In April 1996, the Company upgraded one of the units purchased from another mobile provider (Note 9) to a Siemens 1.0 Tesla Impact unit. The new unit was financed at a net total cost of approximately $1.9 million. The Company financed this new unit with a 60 month dollar-out lease requiring monthly payments of approximately $43,000. In June 1996, the Company upgraded one of its .5 Tesla Signas to a Siemens 1.0 Tesla Impact unit. The new unit was financed at a net total cost of approximately $2.0 million and financed with a 60 month dollar -out lease requiring monthly payments of approximately $43,000. The Company in May 1996 signed an agreement with Siemens Medical Systems to upgrade an additional unit (Note 9) and to purchase a new unit during the fourth quarter of 1996. Delivery of the upgraded unit occurred in July 1996 and the new unit is anticipated to be delivered in November or December 1996. During May 1996, the Company also signed an agreement with GE Medical Systems to upgrade one .5 Tesla Signa unit and to purchase a new unit during the third or fourth quarter of 1996. The Company anticipates completing the GE Medical Systems upgrade and taking delivery of the new GE unit in late September or early October 1996. Upon completion of the aforementioned purchases, the Company's mobile MRI fleet will total sixteen units. -13- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) JUNE 30, 1996 NOTE 5 - INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109. Deferred income taxes are provided to account for temporary differences between financial statement accounting and income tax reporting and relate principally to differences in reporting for diagnostic medical equipment, depreciation, accrued expenses and net operating loss carryforwards. NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION The total amount of interest payments during the six months ended June 30, 1996 and 1995 were approximately $960,000 and $865,000, respectively. In addition, income tax payments for the six month period ended June 30, 1996 and 1995 were approximately $196,000 and $24,000, respectively. NOTE 7 - SALE OF PARTNERSHIP INTERESTS On June 30, 1995, in conjunction with the sale of the Airport Center which had been treated as a discontinued operation, the Company sold its majority ownership and general partner rights in four cardiac care partnerships for a total sale price of $300,000 comprised of $200,000 in cash and a $100,000, thirty-month note. The Company recognized a pre-tax gain on this sale of $48,219. The partnerships, which constituted approximately seven percent of the Company's revenues, had total assets of approximately $1.4 million, comprised primarily of diagnostic equipment and accounts receivable, and total liabilities of approximately $1.2 million comprised primarily of capital lease obligations associated with the diagnostic equipment. -14- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) JUNE 30, 1996 NOTE 8 - LITIGATION The Company has been named as a defendant, along with the hospital which contracts for the Company's MRI services, in a claim filed by a woman who alleges to have incurred partial paralysis as a result of being mishandled during an MRI procedure. The claim has been filed for $6.0 million in damages. The claim is in the early discovery stages. The Company does not believe that it has been negligent in any manner and intends to vigorously defend the claim. The Company has approximately $2.0 million of insurance related to this matter. Management does not believe the outcome of this matter will result in a material adverse effect on its operations or financial condition. NOTE 9 - ACQUISITION On March 21, 1996, the Company purchased certain assets of a mobile provider which operated mobile units in the state of North Carolina (the "Seller"). The purchase price approximated $600,000 in cash [net of negotiated trade-in value of approximately $500,000 (which approximated the purchase price of the units acquired) for two of the Seller's mobile MRI units] in exchange for MRI Programs including Certificate of Need licenses or exemptions and certain customer service contracts. The Company traded-in and upgraded one of the purchased units to newer technology in April 1996 and intends to trade-in and upgrade the second unit during July 1996 (Note 4). The transaction increased the Company's mobile MRI fleet to 14 units. NOTE 10 - STOCK OPTIONS, UNIT PURCHASE OPTIONS AND WARRANTS During May and June 1996, stock options covering 465,700 shares of Common Stock were exercised pursuant to the Company's 1991 Employee Stock Option Plan and 1991 Director Stock Option Plan. The Company received approximately $945,000 as a result of such stock option exercises. At June 30, 1996, options to purchase 360,175 and 47,900 shares were exercisable pursuant to the employee and director stock option plans, respectively. -15- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) JUNE 30, 1996 NOTE 10 - STOCK OPTIONS, UNIT PURCHASE OPTIONS AND WARRANTS (Continued) During July 1996, a transferee of a portion of a Unit Purchase Option initially granted to the Company's Initial Public Offering underwriter exercised a portion thereof to purchase 15,000 units (comprised of one share of Common Stock and one Warrant exercisable to one share of Common Stock) at $5.94. The Company received approximately $89,000 as a result of such exercise. Transferees from the Initial Public Offering underwriters maintain options to purchase an additional 111,000 units. During July 1996, the Managing Director of Commonwealth Associates, Inc. exercised 50,000 Warrants at an exercise price of $4.47 in a cashless transaction whereby he tendered shares of Common Stock as payment of the purchase price in connection with the exercise of the Warrants. Accordingly, the Company issued 19,172 shares of Common Stock and retired into Treasury Stock 30,828 shares of Common Stock pursuant to this exercise. Commonwealth Associates, Inc. holds 50,000 additional Warrants with an exercise price of $4.47. -16- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The discussion that follows should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes thereto of SMT Health Services Inc. and Subsidiaries. Results of Operations The following table sets forth for the periods indicated the percentages which the items in the Statement of Operations bear to revenues and the dollar increase (decrease) of such items as compared to the corresponding period in the prior year.
Percentage of Revenue Increase (Decrease)Prior Year ----------------------------------------------------------------------- Three Six Months Three Six Months Months Ended Ended Months Ended Ended ---------------------------------------------------------------------- 6/30/96 6/30/95 6/30/96 6/30/95 6/30/96 6/30/96 =============================================================================== Revenues 100% 100% 100% 100% $748,000 $1,265,000 - ------------------------------------------------------------------------------- Cost & Expenses: - ------------------------------------------------------------------------------- Operating 33% 38% 33% 38% 37,000 37,000 - ------------------------------------------------------------------------------- Depreciation & Amortization 24% 24% 24% 25% 200,000 253,000 - ------------------------------------------------------------------------------- S, G & A 15% 15% 16% 15% 93,000 210,000 - ------------------------------------------------------------------------------- Interest 11% 12% 11% 12% 38,000 57,000 - ------------------------------------------------------------------------------- Total Costs and Expenses 83% 89% 84% 90% 368,000 557,000 - ------------------------------------------------------------------------------- Income From Operations Before Taxes, Minority Interests and Gain on Sale 17% 11% 16% 10% 380,000 708,000 - ------------------------------------------------------------------------------- Minority Interests -- 1% -- -- (23,000) (50,000) - ------------------------------------------------------------------------------- Income From Operations Before Taxes and Gain On Sale 17% 10% 16% 10% 403,000 758,000 - ------------------------------------------------------------------------------- Gain on Sale of Partnership Interests -- 1% -- 1% (48,000) (48,000) - ------------------------------------------------------------------------------- Income Before Income Taxes 17% 11% 16% 11% 355,000 710,000 - ------------------------------------------------------------------------------- Income Taxes 5% 3% 5% 3% 121,000 261,000 - ------------------------------------------------------------------------------- Net Income 12% 8% 11% 8% $234,000 $449,000 - -------------------------------------------------------------------------------
-17- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) Three Months Ended June 30, 1996 Compared To The Three Months Ended June 30, 1995 Revenues for the second quarter of 1996 increased $748,000, or 19%, to $4,628,000 compared to $3,880,000 for the second quarter of 1995. Excluding revenues of approximately $280,000 for the second quarter of 1995 related to the Company's cardiac partnerships, which were sold on June 30, 1995, mobile MRI revenues increased approximately 28%. This increase in revenue was primarily attributed to the fact that the Company purchased one new unit in September 1995, one new unit in February 1996 and two new units in March 1996, as well as increased utilization of the Company's mobile MRI units. Revenues derived from hospitals which the Company serviced in both comparable periods increased 10% during the second quarter of 1996 compared to the second quarter of 1995 primarily as a result of increased MRI procedures. Operating expenses increased $37,000 to $1,525,000 during the second quarter of 1996 compared to $1,487,000 during the second quarter of 1995. Excluding approximately $94,000 of operating expenses associated with the cardiac partnerships which were sold on June 30, 1995, mobile MRI operating expenses increased $132,000 primarily due to approximately $331,000 of operating expenses associated with the Company's new units purchased in September 1995 and the first quarter of 1996, partially offset by a decrease of approximately $199,000, or 15%, in operating expenses of units in operation for both comparable periods. This 15% decrease is primarily a result of $67,000 of savings on lower maintenance and cryogen contracts, $44,000 saving on state sales taxes on certain units and $27,000 savings on the rental of the tractors used to transport the MRI units. Depreciation and amortization expense increased $200,000, or 22%, in the second quarter of 1996 to $1,120,000 from $920,000 during the second quarter of 1995. This increase was primarily due to depreciation expense associated with the Company's new units purchased in September 1995 and the first quarter of 1996. -18- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) Three Months Ended June 30, 1996 Compared To The Three Months Ended June 30, 1995 (continued) Selling, general and administrative costs in the second quarter of 1996 increased $93,000 to $691,000, or 15% of revenues, compared to $598,000, or 15% of revenues during the second quarter of 1995. The increase is primarily due to increased compensation costs related to the Company's management bonus plan. Interest expense for the second quarter of 1996 increased $38,000 to $489,000 compared to $451,000 for the second quarter of 1995 primarily as a result of the new units purchased in September 1995, February 1996 and March 1996. The Company reported net income of $563,000, or $.15 per share, during the second quarter of 1996 versus $329,000, or $.12 per share, during the second quarter of 1995. Income tax expense for the second quarter of 1996 was $240,000 as compared to income tax expense of $119,000 for the second quarter of 1995. Six Months Ended June 30, 1996 Compared To The Six Months Ended June 30, 1995 Revenues for the six months ended June 30, 1996 increased $1,265,000, or 17%, to $8,809,000 compared to $7,544,000 for the six months ended June 30, 1995. Excluding revenues of approximately $548,000 for the six months ended June 30, 1995 related to the company's cardiac partnerships, which were sold on June 30, 1995, mobile MRI revenues increased approximately 26%. This increase in revenue was primarily attributed to the aforementioned new units purchased during late 1995 and the first quarter of 1996 as well as increased utilization of the Company's mobile MRI units. Revenues derived from hospitals which the Company serviced in both comparable periods increased approximately 10% during the six months ended June 30, 1996 compared to the six months ended June 30, 1995 primarily as a result of increased MRI procedures. Operating expenses increased $37,000 to $2,891,000 during the six months ended June 30, 1996 compared to $2,854,000 during the six months ended June 30, 1995. Excluding approximately $179,000 of operating expenses associated with the cardiac partnerships which were sold on June 30, 1995, mobile MRI operating -19- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) Six Months Ended June 30, 1996 Compared To The Six Months Ended June 30,1995 (Continued) expenses increased $216,000 primarily due to approximately $485,000 of operating expenses associated with the Company's new units purchased in September 1995 and the first quarter of 1996, partially offset by a decrease of approximately $269,000, or 11%, in operating expenses of units in operation for both comparable periods. This 11% decrease is primarily a result of $102,000 of savings on lower maintenance and cryogen contracts, $89,000 saving on state sales taxes on certain units and $55,000 savings on the rental of the tractors used to transport the MRI units. Depreciation and amortization expense increased $253,000, or 14%, during the six months ended June 30, 1996 to $2,109,000 from $1,856,000 during the six months ended June 30, 1995. This increase was primarily due to depreciation expense associated with the Company's new units purchased during late 1995 and the first quarter of 1996. Selling, general and administrative costs during the six months ended June 30, 1996 increased $210,000 to $1,373,000, or 16% of revenues, compared to $1,163,000, or 15% of revenues during the six months ended June 30, 1995. The increase is primarily due to increased compensation costs related to the Company's management bonus plan and a one-time $50,000 prepayment of a consulting fee related to the termination of a consulting arrangement. Interest expense for the six months ended June 30, 1996 increased $57,000 to $946,000 compared to $889,000 for the six months ended June 30, 1995 primarily as a result of the new units purchased during late 1995 and the first quarter of 1996. The Company reported net income of $1,021,000, or $.29 per share, for the six months ended June 30, 1996 versus $571,000, or $.22 per share, during the six months ended June 30, 1995. Income tax expense for the six months ended June 30, 1996 was $469,000 as compared to income tax expense of $208,000 for the six months ended June 30, 1995. -20- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 1996, the Company experienced a net increase of $3,025,000 in cash from operations as compared to a net increase of $2,418,000 during the six months ended June 30, 1995. This increase is primarily due to increased income. The Company used cash in investing activities during the six months ended June 30, 1996 of $1,637,000, primarily related to down payments on the purchase of new MRI units totaling approximately $1,400,000 as well as the purchase of a mobile MRI company in March 1996 for approximately $643,000 (see Note 9 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference) partially offset by a reduction in the amount of restricted cash related to equipment financing. The Company used cash in financing activities during the second quarter of 1996 of approximately $1,169,000 primarily related to $2,113,000 of principal payments under loan agreements and capital leases partially offset by approximately $945,000 received upon exercise of stock options during the second quarter of 1996. The Company incurred a net increase in unrestricted cash and cash equivalents of approximately $219,000 during the six months ended June 30, 1996 and maintained an unrestricted cash balance at June 30, 1996 of approximately $2,560,000. The Company also maintained a restricted cash balance of $1,270,000 at June 30, 1996. The Company's trade accounts receivable balance increased by $342,000 to $1,402,000 at June 30, 1996 primarily due to higher service revenues during the quarter ended June 30, 1996. In the experience of the Company, average accounts receivable collections typically do not exceed 40 days, as there are no billings which relate to the Company's core mobile MRI business subject to traditional third-party payors, and the accounts receivable balance turned over approximately six times during the six months ended June 30, 1996. Approximately 30% of the Company's billings and collections are processed through Hospital Shared Services ("HSS"), a representative of certain hospitals. As a fee for these services, HSS -21- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) retains approximately 2.5% of gross billings to these hospitals and the Company records the service revenues and related receivables net of such fees. At June 30, 1996, the Company had a working capital deficit of $98,000. However, the Company's cash flow from operations totaled $3,024,000 for the six months ended and the Company continues a positive cash flow. Further, $5,285,000 of the $6,100,000 of current liabilities relate to the current portion of capital leases and long-term debt which will be due over the next twelve months, as opposed to current assets of $6,002,000 which are highly liquid and turn over frequently. The Company has been able to meet all past debt service obligations, currently is able to meet all such obligations, and anticipates it will continue to meet such obligations. As in the past, management anticipates that such obligations will be funded by the revenues generated by the Mobile Units and equipment. To date, the Company has financed its equipment acquisitions and working capital requirements with loans and leases, from internal cash flow and capital contributions. As of June 30, 1996, the Company was a party to leases and loans covering all of its mobile MRI units. The aggregate outstanding principal balance of all such leases and loans was approximately $20,522,000 at June 30, 1996. The amount of such leases and other debt obligations due during the next twelve months is approximately $5,285,000. On June 30, 1995, the Company sold its majority ownership and general partner rights in four cardiac care partnerships for a total sale price of $300,000 comprised of $200,000 in cash and a $100,000 thirty-month note. The Company recognized a pre-tax gain on this sale of $48,219. The partnerships, which constituted approximately seven percent of the Company's revenues, had total assets of approximately $1.4 million, comprised primarily of diagnostic equipment and accounts receivable, and total liabilities of approximately $1.2 million comprised primarily of capital lease obligations associated with the diagnostic equipment. -22- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) In February 1995, the Company purchased an eighteen-month-old Siemens 1.0 Tesla Impact Mobile Unit for approximately $1.2 million. The Company financed the purchase of this unit under a 48 month dollar-out lease requiring monthly payments of approximately $31,000. In June 1995, the Company upgraded one of its .5 Tesla General Electric Signas to a 1.0 Tesla Signa for approximately $1.9 million. The Company financed the purchase of this unit with a 60 month dollar-out lease requiring monthly payments of approximately $41,000. In September 1995, the Company purchased a new unit for approximately $1.9 million. The Company financed the purchase of this new unit with a 60 month loan requiring monthly payments of approximately $40,000. The Company upgraded one of its .5 Tesla Signas to a 1.0 Tesla Horizon unit. The new unit was financed at a net total cost of approximately $2.0 million and was delivered in late February 1996. The Company financed the purchase of this new unit with a 60 month dollar-out lease requiring monthly payments of approximately $44,000. The Company contracted with several new hospital clients and purchased a new Siemens 1.0 Tesla Impact unit which began service in mid-February 1996. The cost of this new unit approximated $1.9 million. The Company financed the purchase of this new unit with a 60 month loan requiring monthly payments of approximately $35,000. In April 1996, the Company upgraded one of the units purchased from another mobile provider (see Note 9 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference) to a Siemens 1.0 Tesla Impact unit. The new unit was financed at a net total cost of approximately $1.9 million. The Company financed this new unit with a 60 month dollar-out lease requiring monthly payments of approximately $43,000. -23- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) In June 1996, the Company upgraded one of its .5 Tesla Signas to a Siemens 1.0 Tesla Impact unit. The new unit was financed at a net total cost of approximately $2.0 million and financed with a 60 month dollar-out lease requiring monthly payments of approximately $43,000. The Company in May 1996 signed an agreement with Siemens Medical System to upgrade an additional unit (see Note 9 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference) and to purchase a new unit during the fourth quarter of 1996. Delivery of the upgraded unit occurred in July 1996 and the new unit is anticipated to be delivered in November or December 1996. During May 1996, the Company also signed an agreement with GE Medical Systems to upgrade one .5 Tesla Signa unit and to purchase a new unit during the third or fourth quarter of 1996. The Company anticipates completing the GE Medical Systems upgrade and taking delivery of the new GE unit in late September or early October 1996. Upon completion of the aforementioned purchases, the Company's mobile MRI fleet will total sixteen units. Prior to July 1, 1995, the Company subleased certain truck cabs from Shared Mobile Enterprises ("SME"), which, in turn, leased such truck cabs from an independent third-party leasing company. Effective July 1, 1995, SME released the Company from its obligations under ten long-term subleases in exchange for the issuance to SME of 120,000 unregistered Common Shares valued at $3 per share, the weighted average closing price for the stock for the prior thirty trading days. The Company received an opinion from an independent financial advisor that the transaction was fair to the Company and its shareholders. At the same time, with the concurrence of the third-party leasing company, the Company assumed SME's obligations under its original lease and modified that lease by (i) extending the lease term by one additional year and (ii) adding one additional truck cab to the schedule of leased property with a corresponding increase in base rental payments. The $360,000 value of the shares represents the present value of the excess of the sublease payments over the original lease payments. The Company -24- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) has capitalized the $360,000 and is amortizing this prepaid rent over a period which approximates the lease term. SME was one hundred percent beneficially owned by certain officers/directors and a former director/ consultant of the Company who own approximately 18% of the Company's outstanding Common Shares. The Company has outstanding a letter-of-credit totaling $400,000 related to equipment financing at a freestanding diagnostic imaging center which it sold in June 1995 and on which it remains obligated (see Note 4 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference). In November 1994, the Company issued a letter-of-credit in the amount of $270,000 related to the purchase and financing of a new Mobile Unit. The letter-of-credit is scheduled to be reduced at various times beginning in 1997. In relation to the refinancing of the four Mobile Units in February and March 1995, the Company issued two letters-of-credit in the aggregate amount of $930,000. In February 1996, the lessor holding one of the letters-of-credit totaling $330,000 allowed the letter-of-credit to expire. On July 31, 1996, the Company refinanced two MRI units which had previously been refinanced in March 1995 to more favorable lease terms. The new leases total approximately $2.3 million (net of a $150,000 down payment) in the aggregate and are being financed over a thirty-six month period at an interest rate of 9.25%. The refinancing will result in annual cash flow savings to the Company of approximately $200,000. As a result of this refinancing, the $600,000 letter-of-credit which had been issued in March 1995 has been terminated. -25- SMT HEALTH SERVICES INC. AND SUBSIDIARIES JUNE 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) On March 21, 1996, the Company purchased certain assets of a mobile provider which operated mobile units in the state of North Carolina (the "Seller"). The purchase price approximated $600,000 in cash [net of negotiated trade-in value of approximately $500,000 (which approximated the purchase price of the units acquired) for two of the Seller's mobile MRI units] in exchange for MRI Programs including Certificate of Need licenses or exemptions and certain customer service contracts. The Company traded-in and upgraded one of the purchased units to newer technology in April 1996 and traded-in and upgraded the second unit in July 1996. The unit upgraded in July 1996 is currently contracted to provide temporary interim service to hospitals for a period of approximately one year. The Company has been named as a defendant, along with the hospital which contracts for the Company's MRI services, in a claim filed by a woman who alleges to have incurred partial paralysis as a result of being mishandled during an MRI procedure. The claim has been filed for $6.0 million in damages. The claim is in the early discovery stages. The Company does not believe that it has been negligent in any manner and intends to vigorously defend the claim. The Company has approximately $2.0 million of insurance related to this matter. Management does not believe the outcome of this matter will result in a material adverse effect on its operations or financial condition. Management believes that the healthcare industry continues to be in a period of consolidation characterized by mergers, joint ventures, acquisitions, sales of all or part of healthcare companies or their assets, and other partnering and investment transactions of various structures and sizes involving healthcare companies. The Company continues to evaluate new opportunities that allow for the expansion of its business through the acquisition of additional Mobile Units in geographic proximity to its existing regional markets or in locations that can serve as a basis for new market areas. The Company, like other healthcare companies, has participated from time to time and is participating in preliminary discussions with third parties regarding a variety of potential transactions, and the Company has considered and expects to continue to consider and explore potential transactions of various types with other healthcare companies. However, no assurances can be given as to whether any such transactions may be consummated or, if so, when. -26- PART II - OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On April 23, 1996, the Company held its annual shareholder meeting. Three matters were voted upon at the meeting, which included the Election of Directors, the Ratification of Appointment of KPMG Peat Marwick LLP as auditors for the 1996 fiscal year and a proposed amendment to the Company's 1991 Employee Stock Option Plan. Each of the Company's nominees for Director was reelected at the annual meeting. The total number of votes cast for the Election of Directors was 2,125,000. The total number of broker non-votes for the Election of Directors was zero. Following is a separate tabulation with respect to each Director.
Votes Votes For Withheld --------- -------- 1) Gerald L. Cohn 2,121,950 3,050 2) Alan Novich 2,121,950 3,050 3) David J. Malone 2,121,950 3,050 4) Daniel Dickman 2,121,950 3,050 5) Jeff D. Bergman 2,121,950 3,050
The total number of votes cast for the Ratification of Appointment of KPMG Peat Marwick LLP as auditors for the 1996 fiscal year was 2,069,375 votes for, 50,975 votes against and 4,650 votes abstained. The total number of broker non-votes related to this matter was zero. The total number of votes cast for the approval of the amendment to the 1991 Employee Stock Option Plan was 852,218 votes for, 178,545 votes against and 17,725 votes abstained. The total number of broker non-votes related to this matter was 1,076,512. This amendment was not approved. Item 5. OTHER INFORMATION. On July 12, 1996, the Company had a Registration Statement on Form S-3 (Registration Nos. 33-44329, 33-86920, 33-80571) declared effective by order of the Securities and Exchange Commission. -27- PART II - OTHER INFORMATION Item 5. OTHER INFORMATION. (Continued) The shelf registration statement includes a combined Common Stock prospectus from three registration statements, including the Company's IPO. In total, the shelf registration statement covers 3,494,623 shares of Common Stock (approximately 2.7 million of such shares previously registered), including 1,793,348 shares of Common Stock that may be sold by the Company pursuant to the exercise of the Company's publicly-traded redeemable warrants originally issued in the IPO, 352,000 shares (including 126,000 shares included within the 1,793,348 shares shown above) that may be sold by the Company's former underwriters and/or their affiliates pursuant to options and warrants held by them, and 1,475,275 shares of Common Stock that may be sold by the Company's executive officers and directors pursuant to shares owned outright and shares acquirable upon the exercise of outstanding options and warrants. The Company issued two press releases related to this shelf registration filing dated July 16, 1996 and August 2, 1996. The Company also issued certain other press releases regarding its business. See Exhibits 99.01 - 99.05 filed herewith. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 11.01 Earnings Per Share Computation ... Filed herewith. 27.01 Financial Data Schedule ... Filed herewith. 99.01 Press release dated May 21, 1996 ...Filed herewith. 99.02 Press release dated May 30, 1996 ...Filed herewith. 99.03 Press release dated July 16, 1996 ...Filed herewith. 99.04 Press release dated July 23, 1996 ...Filed herewith. 99.05 Press release dated August 2, 1996 ...Filed herewith. (b) Report on Form 8-K. The Company has not filed any reports on Form 8-K during the quarter ended June 30, 1996. -28- 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 understanding thereunto duly authorized. SMT Health Services Inc. (Registrant) Date: August 2, 1996 By: /s/ Jeff D. Bergman --------------------------------- Jeff D. Bergman Chairman and Chief Executive Officer Date: August 2, 1996 By: /s/ David A. Zynn --------------------------------- David A. Zynn Chief Financial Officer,Treasurer and Principal Accounting Officer -29- EXHIBIT INDEX Exhibit No. Reference 11.01 Earnings Per Share Computation Filed herewith. 27.01 Financial Data Schedule Filed herewith. 99.01 Press release dated May 21, 1996 Filed herewith. 99.02 Press release dated May 30, 1996 Filed herewith. 99.03 Press release dated July 16, 1996 Filed herewith. 99.04 Press release dated July 23, 1996 Filed herewith. 99.05 Press release dated August 2, 1996 Filed herewith. -30- 11.01 SMT EPS Calculation-Modified Treasury Stock Method Three Months Ended June 30, 1996
Exercise Assumed Assumptions Shares Price Proceeds - -------------------------------------------------------------------------- Net income $ 562,995 Common Shares Outstanding 2,802,000 20% of Common Shares Outstanding 560,400 Common Stock Equivalent (Aggregate): Warrants-IPO 1,587,950 $6.67 $10,591,627 Effect of 5% Dividend 79,398 Options- employees 1993 Grant 106,275 $3.33 $353,896 1994 Grant 1,000 $1.37 $1,370 1995 Grant 36,750 $2.46 $90,405 1995 Grant- #2 150,000 $3.81 $571,875 1996 Grant 39,700 $2.14 $84,958 Options- Directors: 1992 Grant 4,200 $3.21 $13,482 1993 Grant 4,200 $1.78 $7,476 1994 Grant 4,200 $2.20 $9,240 1995 Grant 4,200 $4.38 $18,396 Misc Grant 31,500 $1.78 $56,070 Warrants-Directors All 500,000 $3.88 $1,940,000 Other 114,500 $4.01 $459,145 Warrants- Commonwealth 100,000 $4.47 $447,000 Underwriter options 126,000 $5.94 $748,440 Underwriter Warrants (Unit) 126,000 $6.67 $840,420 5% dividend on Warrants 0 --------- ---------- Total CSE Aggregate 3,015,873 16,233,799 ========= ==========
Average and Quarter End Market Value: Average Closing Price $6.96 Quarter End Closing Price $8.50
Computation: Primary Fully Diluted - --------------------------------------------------------------------------- Total Proceeds $16,233,799 $16,233,799 =========== =========== Application of assumed proceeds: Toward repurchase of o/s shares $3,900,384 $4,763,400 Toward Paydown of debt $12,333,415 $11,470,399 ----------- ----------- $16,233,799 $16,233,799 =========== =========== Adjustment to Net Income: Net income $562,995 $562,995 Interest expense reduction: Debt paydown * avg. int rate * tax effec $241,118 $224,246 ----------- ---------- Adjusted Net Income $804,113 $787,241 =========== ========== Adjustments to Shares Outstanding: Actual shares o/s 2,802,000 2,802,000 Net additional shares 2,455,473 2,455,473 ----------- ---------- Adjusted shares o/s 5,257,473 5,257,473 =========== ========== Earnings Per Share: Before adjustment $0.20 $0.20 =========== ========== After adjustment $0.15 $0.15 =========== ==========
-31- SMT EPS Calculation- Modified Treasury Stock Method Six Months Ended June 30, 1996
Exercise Assumed Assumptions Shares Price Proceeds - ------------------------------------------------------------------------- Net income $1,020,476 Common Shares Outstanding 2,728,000 20% of Common Shares Outstanding 545,600 Common Stock Equivalent (Aggregate): Warrants-IPO 1,587,950 $6.67 $10,591,627 Effect of 5% Dividend 79,398 Options- employees 1993 Grant 106,275 $3.33 $353,896 1994 Grant 1,000 $1.37 $1,370 1995 Grant 36,750 $2.46 $90,405 1995 Grant- #2 150,000 $3.81 $571,875 1996 Grant 39,700 $4.50 $178,650 Options- Directors: 1992 Grant 4,200 $3.21 $13,482 1993 Grant 4,200 $1.78 $7,476 1994 Grant 4,200 $2.20 $9,240 1995 Grant 4,200 $4.38 $18,396 Misc Grant 31,500 $1.78 $56,070 Warrants-Directors All 500,000 $3.88 $1,940,000 Other 114,500 $4.01 $459,145 Warrants- Commonwealth 100,000 $4.47 $447,000 Underwriter options 126,000 $5.94 $748,440 Underwriter Warrants(Unit) 126,000 $6.67 $840,420 5% dividend on Warrants 0 --------- ---------- Total CSE Aggregate 3,015,873 16,327,491 ========= ==========
Average and Quarter End Market Value: Average Closing Bid $5.58 Quarter End Closing Bid $8.50
Computation: Primary Fully Diluted - --------------------------------------------------------------------------- Total Proceeds $16,327,491 $16,327,491 =========== =========== Application of assumed proceeds: Toward repurchase of o/s shares $3,044,448 $4,637,600 Toward Paydown of debt $13,283,043 $11,689,891 ----------- ----------- $16,327,491 $16,327,491 =========== =========== Adjustment to Net Income: Net income $1,020,476 $1,020,476 Interest expense reduction: Debt paydown * avg. int rate * tax effec $496,786 $463,796 ----------- ----------- Adjusted Net Income $1,517,262 $1,484,272 =========== =========== Adjustments to Shares Outstanding: Actual shares o/s 2,728,000 2,728,000 Net additional shares 2,470,273 2,470,273 ----------- ----------- Adjusted shares o/s 5,198,273 5,198,273 =========== =========== Earnings Per Share: Before adjustment $0.37 $0.37 =========== =========== After adjustment $0.29 $0.29 =========== ===========
-32- 99.01 Contact: David Zynn, CFO SMT Health Services Inc. (412) 933-3300 http://www.smthealth.com SMT HEALTH SERVICES PURCHASES THREE SIEMENS MOBILE MRI UNITS Pittsburgh, PA, May 21, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) today announced that it has signed a purchase agreement with Siemens Medical Systems for three 1.0T Impact mobile MRI units. SMT is replacing two of its existing .5T systems (including a unit acquired in March from Trans-Carolina Imaging, LLC) with the higher field technology and is expanding its mobile fleet to a total of 15 units. According to Jeff Bergman, SMT's Chief Executive Officer, "The purchase of these three 1.0T units is consistent with our plan to upgrade our fleet to newer and higher field magnets. As our business continues to expand, we want to be able to offer our customers equipment with the best opportunity for quality, speed and range of capabilities." The Company anticipates taking delivery of two units which will replace the existing .5T systems during the second quarter and anticipates taking delivery of the third unit during the third quarter of 1996. SMT Health Services Inc., through its present fleet of fourteen mobile MRI units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia and Kentucky. # # # -33- 99.02 Contact: David Zynn, CFO SMT Health Services Inc. (412) 933-3300 http://www.smthealth.com SMT HEALTH SERVICES PURCHASES TWO GENERAL ELECTRIC MOBILE MRI UNITS Pittsburgh, PA, May 30, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) today announced that it has signed a purchase agreement with General Electric Medical Systems for two 1.0T Horizon High Speed mobile MRI units. SMT is replacing one of its existing .5T systems with the higher field technology and will be expanding its mobile fleet to a total of 16 units. According to Dan Dickman, SMT's Chief Operating Officer, "The purchase of these two 1.0T High Speed Horizon units is another step in SMT's on-going plan to maintain the most modern fleet of MRI equipment in the industry. These new systems have a larger bore to accommodate bigger patients and will include special neuro-imaging and Echo Planner Imaging packages." SMT, which had taken delivery of the first mobile 1.0T High Speed unit GE had produced earlier this year, anticipates taking delivery of the two new units during the third quarter of 1996. SMT Health Services Inc., through its fleet of mobile MRI units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia and Kentucky. # # # -34- 99.03 Contact: David Zynn, CPA Chief Financial Officer SMT Health Services Inc. (412) 933-3300 http://www.smthealth.com SMT HEALTH SERVICES INC. ANNOUNCES EFFECTIVENESS OF SHELF REGISTRATION STATEMENT Pittsburgh, PA, July 16, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) announced today that its shelf registration statement was declared effective by the Securities and Exchange Commission at 4:30 p.m. on Friday, July 12, 1996. The shelf registration statement includes a combined Common Stock prospectus from three registration statements, including the Company's IPO. In total, the shelf registration statement covers 3,494,623 shares of Common Stock (approximately 2.7 million of such shares previously registered), including 1,793,348 shares of Common Stock that may be sold by the Company pursuant to the exercise of the Company's publicly- traded redeemable warrants originally issued in the IPO, 352,000 shares (including 126,000 shares included within the 1,793,348 shares shown above) that may be sold by the Company's former underwriters and/or their affiliates pursuant to options and warrants held by them, and 1,475,275 shares of Common Stock that may be sold by the Company's executive officers and directors pursuant to shares owned outright and shares acquirable upon the exercise of outstanding options and warrants. In the event that all of the shares being offered and sold by the executive officers and directors were so offered and sold, such person's beneficial ownership in the Common Stock would decrease from 33.5% to less than 1%. The Company has been informed that none of the executive officers or directors intend to sell any of their direct holdings, but such executive officers and directors may from time to time sell Common Stock issued upon exercise of outstanding options and warrants. Such sales may take place in open market transactions or block trades. This announcement does not constitute an offer to sell or the solicitation of an offer to buy any of the securities covered by the shelf registration statement, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful, prior to the registration or qualification under the securities laws of any such state. SMT Health Services Inc., through its fleet of fourteen mobile MRI units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia and Kentucky. # # # -35- 99.04 Contact: David Zynn, CFO SMT Health Services Inc. (412) 933-3300 http://www.smthealth.com SMT HEALTH SERVICES REPORTS RECORD SECOND QUARTER AND FIRST HALF EARNINGS; NET INCOME UP 71% AND 79% RESPECTIVELY; MOBILE MRI REVENUES RISE 28% Pittsburgh, PA, July 23, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) today reported record earnings for the second quarter and first half periods ended June 30, 1996. Net income for the 1996 second quarter increased 71% to $563,000, or $0.15 per share, from $329,000, or $.12 per share, reported for the second quarter of 1995. Net income for the six months ended June 30, 1996 increased 79% to $1,021,000, or $.29 per share, as compared to $571,000, or $.22 per share for the six months ended June 30, 1995. The Company attributed the income gains to increased revenues from four additional MRI units and greater operating efficiencies. Revenues for the second quarter of 1996 rose 19% to $4,628,000 from $3,880,000 recorded for the second quarter of 1995. Mobile MRI revenues increased approximately 28% excluding the revenues of $280,000 related to the cardiac partnerships which were sold in June 1995. The revenue gains stemmed primarily from the addition of one new mobile unit placed into service in September 1995, one new mobile unit placed into service in February 1996 and two new mobile units placed into service in late March 1996, as well as greater utilization of the Company's existing fleet of mobile MRI units. Revenues derived from hospitals which the Company serviced in both comparable periods increased 10% during the second quarter of 1996, compared to the second quarter of 1995. Revenues for the six months ended June 30, 1996 rose 17% to $8,809,000 from $7,543,000 in the similar year ago period. Mobile MRI revenues for the six months ended June 30, 1996 rose 26%, compared to the six month period ended June 30, 1995. The Company continued a positive cashflow and maintained a cash balance of $3,830,000 as of June 30, 1996. Cash outflows included in the $600,000 acquisition of a mobile MRI provider in March and approximately $1.4 million used to acquire new MRI units and other equipment. SMT also received approximately $945,000 as a result of the exercise of stock options during the second quarter. The Company previously announced that during the second quarter it upgraded one of its older units, has committed to upgrading two other units during the third quarter and has signed agreements to purchase two new units during the third quarter of 1996, increasing the Company's mobile MRI fleet to sixteen units. SMT Health Services Inc. provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia and Kentucky. (table follows) -36- SMT HEALTH SERVICES INC. AND SUBSIDIARIES CONSOLIDATED SUMMARY OF OPERATIONS
For The Three Months Ended For The Six Months Ended June 30, June 30, -------------------------- ------------------------ 1996 1995 1996 1995 -------------------------- ------------------------ Total Revenues $4,628,000 $3,880,000 * $8,809,000 $7,543,000 * Operating Expenses 1,525,000 1,488,000 2,891,000 2,854,000 Depreciation and Amortization 1,120,000 920,000 2,109,000 1,856,000 Selling, General and Administrative 691,000 598,000 1,373,000 1,163,000 Interest Expense 489,000 451,000 946,000 890,000 ---------- ---------- ---------- ---------- Total Costs and Expenses $3,825,000 $3,457,000 $7,319,000 $6,763,000 ========== ========== ========== ========== Income Before Income Taxes $ 803,000 $ 448,000 $1,490,000 $ 779,000 Income Taxes 240,000 119,000 469,000 208,000 ---------- ---------- ---------- ---------- Net Income $ 563,000 $ 329,000 $1,021,000 $ 571,000 ========== ========== ========== ========== Earnings Per Common Share $ .15 $ .12 $ .29 $ .22 ========== ========== ========== ========== Average Number of Shares Outstanding 2,802,000 2,528,400 2,728,000 2,528,400 ========== ========== ========== ==========
*Includes revenues related to the cardiac partnerships which were sold on June 30, 1995 totaling $280,000 and $548,000 for the three and six months ended June 30, 1995, respectively. -37- 99.05 Contact: David Zynn, CPA Chief Financial Officer SMT Health Services Inc. (412) 933-3300 http://www.smthealth.com SMT HEALTH SERVICES INC. CLARIFIES PREVIOUS SHELF REGISTRATION ANNOUNCEMENT Pittsburgh, PA, August 2, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) today clarified a misinterpretation in the market related to its previous July 16, 1996 press release announcing the effectiveness of a Form S-3 shelf registration statement. The Company clarified that the Form S-3 shelf registration statement does not represent an offering of securities by the Company. The Form S-3 shelf registration statement, declared effective by the Securities and Exchange Commission on July 12, 1996, simply provided registration rights to previously outstanding unregistered securities. In total, the shelf registration statement covers 3,494,623 shares of Common Stock, including approximately 1.8 million shares related to the Company's publicly-traded Warrants. Approximately 2.7 million of the total shares covered by the registration statement had been previously registered. SMT Health Services Inc., through its fleet of fourteen mobile MRI units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia and Kentucky. # # # -38- EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1996 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 3,830,495 0 1,402,074 0 0 6,002,309 27,682,778 6,655,058 28,884,432 6,100,351 0 0 0 31,201 7,335,750 28,884,432 8,724,606 8,808,876 0 6,372,957 0 0 946,443 1,489,476 469,000 1,020,476 0 0 0 1,020,476 .29 0
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