<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-14921
HEALTHTRONICS, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-2210668
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1841 WEST OAK PARKWAY STE. A 30062
MARIETTA, GEORGIA
(Address of principal executive (Zip Code)
offices)
(770) 419-0691
(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.
10,915,685 SHARES OF NO PAR VALUE COMMON STOCK AS OF OCTOBER 31, 2000
Transitional Small Business Disclosure Format (check one) YES [ ] NO [X]
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HEALTHTRONICS, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 2000 (unaudited) and December 31, 1999 3
Condensed Consolidated Unaudited Income Statements
for the three months ended September 30, 2000 and 1999
and for the nine months ended September 30, 2000 and 1999 5
Condensed Consolidated Unaudited Statements of
Cash Flows for the nine months ended September 30, 2000
and 1999 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 17
</TABLE>
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Part 1. Financial Information
Item 1. Financial Statements
HealthTronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,307,484 $ 5,024,890
------------ ------------
Trade accounts receivable, less allowance for doubtful
accounts of $227,064 and $129,237 at September 30,
2000 and December 31, 1999, respectively 7,797,781 4,426,973
Inventory 2,344,899 1,195,743
Due from affiliated equity partnerships 188,269 162,523
Vendor deposits 1,263,283 802,009
Prepaid expenses 295,394 48,778
Deferred income taxes 375,751 375,751
------------ ------------
Total current assets 17,572,861 12,036,667
Property and equipment, at cost:
Medical devices placed in service 11,597,671 9,085,000
Office equipment, furniture and fixtures 361,318 129,942
Vehicles and accessories 1,667,253 1,340,420
------------ ------------
13,626,242 10,555,362
Less accumulated depreciation (4,164,901) (2,376,510)
------------ ------------
Net property and equipment 9,461,341 8,178,852
Partnership investments 643,479 318,150
Goodwill (net of accumulated amortization of $519,971 and
$340,700 at September 30, 2000 and December 31, 1999,
respectively) 3,489,312 2,905,540
Patent license (net of accumulated amortization of $52,491
and $44,993 at September 30, 2000 and December 31, 1999,
respectively) 47,509 55,007
Other assets 21,385 40,465
------------ ------------
Total assets $ 31,235,887 $ 23,534,681
============ ============
</TABLE>
3
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<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
---------------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 1,329,424 $ 1,131,142
Customer deposits 1,220,597 903,352
Income taxes payable 224,890 141,652
Warranty accrual 556,470 513,305
Other accrued expenses 1,556,889 1,099,751
Deferred profit on service contracts 114,400 90,155
Short-term borrowings 1,383,324 --
Current portion of long-term debt 1,271,145 1,287,054
----------- -----------
Total current liabilities 7,657,139 5,166,411
Deferred income taxes 12,977 12,977
Deferral of profit on medical device sales to related
parties 251,867 244,194
Long-term debt, less current portion 2,603,073 1,759,126
Minority interest 3,683,968 2,224,087
----------- -----------
Total liabilities 14,209,024 9,406,795
Shareholders' equity:
Common stock - no par value, voting:
Authorized - 30,000,000 shares at September 30, 2000
and December 31, 1999
Issued and outstanding - 10,912,351 and 10,716,271
shares at September 30, 2000 and December 31, 1999,
respectively 13,098,350 12,309,181
Retained earnings 3,928,513 1,818,705
----------- -----------
17,026,863 14,127,886
----------- -----------
Total liabilities and shareholders' equity $31,235,887 $23,534,681
=========== ===========
</TABLE>
See accompanying notes.
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HealthTronics, Inc. and Subsidiaries
Condensed Consolidated Income Statements
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
2000 1999 2000 1999
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenue $ 9,025,518 $ 6,849,538 $ 25,390,012 $ 18,504,550
Cost of goods sold, rentals and
services provided 3,325,176 2,584,308 10,245,482 8,050,490
------------ ------------ ------------ ------------
5,700,342 4,265,230 15,144,530 10,454,060
Salaries, wages and benefits 555,712 533,094 1,619,602 1,600,699
General and administrative
expenses 1,606,399 1,138,407 4,930,214 3,021,850
------------ ------------ ------------ ------------
3,538,231 2,593,729 8,594,714 5,831,511
Equity in earnings of unconsolidated
partnerships 48,631 38,865 125,850 83,728
Minority interest (2,347,223) (1,743,993) (5,240,545) (3,604,390)
Interest expense (106,646) (76,590) (288,732) (250,627)
Interest income 66,843 -- 174,571 1,321
Partnership distributions from cost
based investments 111,240 41,143 271,743 95,376
------------ ------------ ------------ ------------
Net income before income taxes 1,311,076 853,154 3,637,601 2,156,919
Provision for income taxes (542,387) (365,437) (1,527,793) (905,623)
------------ ------------ ------------ ------------
Net income $ 768,689 $ 487,717 $ 2,109,808 $ 1,251,296
============ ============ ============ ============
Basic and diluted income per
common share:
Basic $ 0.07 $ 0.05 $ 0.20 $ 0.13
============ ============ ============ ============
Diluted $ 0.07 $ 0.05 $ 0.19 $ 0.13
============ ============ ============ ============
Weighted average common shares
outstanding:
Basic 10,879,976 10,074,038 10,790,135 9,808,199
============ ============ ============ ============
Diluted 11,226,825 10,263,704 11,111,914 9,997,866
============ ============ ============ ============
</TABLE>
See accompanying notes.
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HealthTronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
---------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,109,808 $ 1,251,296
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 1,975,160 1,206,294
Provision for doubtful accounts 97,827 --
Deferral of profit on medical device sales or
other revenues 31,918 238,680
Equity in earnings of unconsolidated
partnerships, net of dividends (125,850) (83,728)
Minority interest in subsidiaries, net of
distributions 1,459,881 748,869
Changes in operating assets and liabilities,
net of business acquired:
Trade accounts receivable (3,468,635) (1,815,998)
Inventory (1,149,156) (270,086)
Due from affiliated equity partnerships (25,746) (49,504)
Vendor deposits (461,274) (517,220)
Prepaid expenses (246,616) 188,842
Trade accounts payable 198,282 645,735
Customer deposits 317,245 594,352
Income taxes payable 83,238 205,494
Warranty accrual 43,165 101,004
Other accrued expenses 457,138 571,513
---------- -----------
Net cash provided by operating activities 1,296,385 3,015,543
</TABLE>
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HealthTronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
--------------------------------------
<S> <C> <C>
INVESTING ACTIVITIES
Purchases of property and equipment, net of business
acquired (2,983,923) (2,623,292)
Business acquisition (850,000) --
Other assets 19,080 (1,657)
Purchases of partnership investments, net of cash
acquired (199,479) (85,491)
----------- -----------
Net cash used in investing activities (4,014,322) (2,710,440)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 789,169 4,847,079
Proceeds from issuance of long-term debt 2,107,617 781,672
Principal payments on long-term debt (1,279,579) (1,524,285)
Proceeds from short-term borrowings 6,160,577 3,988,714
Principal payments on short-term borrowings (4,777,253) (3,893,576)
----------- -----------
Net cash provided by financing activities 3,000,531 4,199,604
----------- -----------
Net increase in cash and cash equivalents 282,594 4,504,707
Cash and cash equivalents at beginning of period 5,024,890 801,563
----------- -----------
Cash and cash equivalents at end of period $ 5,307,484 $ 5,306,270
=========== ===========
</TABLE>
See accompanying notes.
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HealthTronics, Inc and Subsidiaries
Notes To Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements include the
accounts of HealthTronics, Inc. and its subsidiaries. All significant
intercompany transactions have been eliminated.
In the opinion of HealthTronics management, the accompanying
unaudited consolidated financial statements include all the necessary
adjustments (consisting of normal recurring adjustments) for a fair
presentation of its consolidated financial position and results of
operations for the interim periods presented. The information presented
in these financial statements has not been audited but was prepared in
conformity with generally accepted accounting principles for interim
financial information and instructions for Form 10-QSB and Item 310(b)
of Regulation S-B. Although management believes that the disclosures in
these financial statements are adequate to make the information
presented not misleading, certain information and disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
financial statements should be read in conjunction with HealthTronics'
Annual Report on Form 10-KSB for the year ended December 31, 1999 filed
with the Securities and Exchange Commission.
Preparation of these interim consolidated financial statements
in accordance with generally accepted accounting principles requires
management to make certain estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes.
The interim results may not be indicative of the results that may be
expected for the year.
Certain prior year balances have been reclassified to conform
to the 2000 presentation.
2. Description of Business
HealthTronics, Inc. (the "Company") was incorporated in the
State of Georgia in 1995. The Company was established to pursue Food &
Drug Administration ("FDA") approval (Pre-Market Approval - "PMA") for
orthopaedic and urologic applications of extracorporeal shock wave
therapy ("ESWT") and the marketing of medical devices for these
applications in the United States, Canada and Mexico. Certain products
are already being used outside the United States and Canada. During
1997, the Company received FDA approval to market the LithoTron.
On December 30, 1999, the Company submitted its application to
the FDA requesting pre-market approval of the OssaTron. On July 20,
2000, the Orthopaedic and
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Rehabilitation Devices advisory panel to the FDA recommended to the FDA
that HealthTronics, Inc. be given approval to market the OssaTron for
treatment of chronic proximal plantar fasciitis . On October 12, 2000
the Company received FDA approval to begin marketing the OssaTron for
treatment of plantar fasciitis. The FDA approval was granted based on
the results of a multicenter, randomized, placebo-controlled study of
approximately 300 patients. Approximately 60% of the patients were
considered a success according to the investigator assessment and the
patient's self-assessment after a single active OssaTron treatment. The
comparison of results between active treatment and placebo-treated
patients was highly significant according to the statistical analysis.
With this approval, the OssaTron becomes the only device commercially
available in the United States for the ESWT treatment of plantar
fasciitis. The Company is currently establishing additional test sites
for the OssaTron FDA clinical trials for additional applications.
In 1996, High Medical Technologies AG (HMT) granted to the
Company the right to purchase the manufacturing rights to the OssaTron
medical devices. The Company also operates under the terms of a
distribution agreement with HMT that grants the Company the exclusive
right to make, use, sell and lease the LithoTron and OssaTron and
related parts in the United States, Canada and Mexico.
With each FDA approval, it is the Company's intent to generate
revenues from three sources: 1) sales of medical devices including
related accessories; 2) recurring revenues from licensing fees, sales
of consumable products and maintenance of equipment; and 3) investment
income generated from partnerships and joint ventures with physicians,
surgery centers and hospitals that purchase equipment from the Company
as well as management fees from such entities.
In order to appropriately reflect the nature of the Company's
operations and its relationship to its subsidiaries, the accompanying
consolidated statements of income include the Company's appropriate
majority or minority equity ownership interest in the net revenues and
expenses of each of its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
3. Business Acquisition and Disposition
On January 24, 2000, the Company completed the acquisition of
the assets of Health Horizons (E.S.W.L.), L.P. for $850,000 in cash and
the assumption of certain liabilities, including a lease, trade and
accounts payable and obligations under regulatory permits. The assets
purchased included a lithotripter and related medical equipment, other
furniture, equipment, patient records and other related assets used in
New Jersey Kidney Stone Treatment Center. The purchase price was
determined and negotiated by the parties based on the expected annual
cash flow to be generated by the assets purchased. The Company financed
the acquisition with working capital generated by its business. The
Company pre-negotiated to sell its interest in the assets purchased to
a limited liability company, which will be managed by the Company and
of which the
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Company will own 20 to 30%. The sale of the assets from Health Horizons
(E.S.W.L.) L.P. to the newly established limited liability company was
consummated on June 1, 2000. The remaining members will be independent
of the Company. Based upon the Company's ability to exercise control
over the operating and financial policies of the new limited liability
company, the Company has consolidated the financial position and
results of operations of the new limited liability company.
HealthTronics, Inc. and Subsidiaries
Pro Forma Combined Condensed Statements of Income
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------
HEALTHTRONICS, HEALTH HORIZONS PRO FORMA PRO FORMA
INC. (E.S.W.L.) L.P. ADJUSTMENTS COMBINED
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $25,390,012 $235,272 $ 0 $25,625,284
Income before income taxes $ 3,637,601 $ 78,318 $ (4,185) $ 3,711,734
Net income $ 2,409,808 $ 78,318 $(36,436) $ 2,451,690
Basic income per common share $ 0.20 $ 0.23
Diluted income per common share $ 0.19 $ 0.22
</TABLE>
HealthTronics, Inc. and Subsidiaries
Pro Forma Combined Condensed Statements of Income
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------
HEALTHTRONICS, HEALTH HORIZONS PRO FORMA PRO FORMA
INC. (E.S.W.L.) L.P. ADJUSTMENTS COMBINED
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $18,504,550 $2,577,806 $ 0 $21,082,356
Income before income taxes $ 2,156,919 $1,064,307 $ (42,498) $ 3,178,728
Net income $ 1,251,296 $1,064,307 $(422,606) $ 1,892,997
Basic income per common share $ 0.13 $ 0.19
Diluted income per common share $ 0.13 $ 0.19
</TABLE>
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4. Inventory
Inventory is carried at the lower of cost (first-in, first-out) or
market and consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------------------------------
(UNAUDITED)
<S> <C> <C>
Medical devices and accessories $2,098,350 $1,110,163
Consumables 246,549 85,580
---------- ----------
$2,344,899 $1,195,743
========== ==========
</TABLE>
5. Earnings Per Share Information
The following table sets forth the computation of earnings per share:
<TABLE>
<CAPTION>
Three Months Ended September 30 , Nine Months Ended September 30,
2000 1999 2000 1999
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Numerator: Net income $ 768,689 $ 487,717 $ 2,109,808 $ 1,251,296
=========== =========== =========== ===========
Denominator for weighted average
shares outstanding 10,879,976 10,074,038 10,790,135 9,808,199
Basic earnings per share 0.07 0.05 0.20 0.13
Effect of dilutive securities:
Weighted average shares
outstanding 10,879,976 10,074,038 10,790,135 9,808,199
Stock options 346,849 189,667 321,779 189,667
----------- ----------- ----------- -----------
Denominator for diluted earnings per
share 11,226,825 10,263,704 11,111,914 9,997,866
Diluted earnings per share 0.07 0.05 0.19 0.13
</TABLE>
6. Stock Options
In March 2000 and August 2000, the Company filed a Form S-8 with the
Securities and Exchange Commission to register 800,000 and 1,000,000
shares respectively, of its common stock in connection with the
Company's option plans.
7. Line of Credit
Effective June 30, 2000 the Company replaced its $1,200,000 line of
credit and $1,000,000 equipment financing with a $5,000,000 line of
credit, maturing April 30, 2001. At September 30, 2000, there is
$1,383,324 outstanding under this line of credit.
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Item 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
The following discussion and analysis of financial condition and
results of consolidated operations should be read in conjunction with the
unaudited financial statements included elsewhere in this Form 10-QSB.
RESULTS OF CONSOLIDATED OPERATIONS
GENERAL
The Company submitted its application to the FDA, on December 30, 1999,
requesting pre-market approval of the OssaTron, a noninvasive shock wave therapy
device used for the treatment of planatar fasciitis. On July 20, 2000, the
Orthopaedic and Rehabilitation Devices advisory panel to the FDA recommended to
the FDA that HealthTronics, Inc. be given approval to market the OssaTron for
treatment of chronic proximal plantar fasciitis . On October 12, 2000 the
Company received FDA approval to begin marketing the OssaTron for treatment of
plantar fasciitis. The FDA approval was granted based on the results of a
multicenter, randomized, placebo-controlled study of approximately 300 patients.
Approximately 60% of the patients were considered a success according to the
investigator assessment and the patient's self-assessment after a single active
OssaTron treatment. The comparison of results between active treatment and
placebo-treated patients was highly significant according to the statistical
analysis. With this approval, the OssaTron becomes the only device commercially
available in the United States for the ESWT treatment of plantar fasciitis. The
Company is currently establishing additional test sites for the OssaTron FDA
clinical trials for additional applications.
On January 24, 2000, HealthTronics, Inc. (the "Company") completed the
acquisition of the assets of Health Horizons (E.S.W.L.), L.P. for $850,000 in
cash and the assumption of certain liabilities, including a lease, trade and
accounts payable and obligations under regulatory permits. The assets purchased
included a lithotripter and related medical equipment, other furniture,
equipment, patient records and other related assets used in New Jersey Kidney
Stone Treatment Center. The purchase price was determined and negotiated by the
parties based on the expected annual cash flow to be generated by the assets
purchased. The Company had pre-negotiated to sell a majority of its interest in
the assets purchased to a limited liability company, which will be managed by
the Company, and of which the Company will own 20 to 30%. The remaining members
will be independent of the Company. The Company financed the acquisition with
working capital generated by its business. Based upon the Company's ability to
exercise control over the operating and financial policies of the new limited
liability company, the Company has consolidated the financial position and
results of operations of the new limited liability company.
In January 2000 the Company and the minority partners of a subsidiary
made additional contributions to the subsidiary. The contributions were used to
pay off the balance of the subsidiary's long-term debt which totaled $309,617 at
December 31, 1999.
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NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
Net Revenue: Net revenue increased from $18,504,550 for the nine months
ended September 30, 1999 to $25,390,012 for the nine months ended September 30,
2000, an increase of 37%. This increase is attributable to (1) the acquisition
of Health Horizons in January 2000, (2) the addition of the LithoTron Ultra
product line, (3) the addition of a service contract product line (4) the
increase in the number of and the revenue growth of existing US Lithotripsy
partnerships and (5) the increase in lease revenues from corporate-owned
equipment.
Cost of Goods Sold, Rentals and Services Provided: Cost of goods sold,
rentals and services provided increased from $8,050,490 for the nine months
ended September 30, 1999 to $10,245,482 for the nine months ended September 30,
2000, an increase of 27%. This increase is attributable to the related costs
associated with (1) the acquisition of Health Horizons in January 2000, (2) the
addition of the LithoTron Ultra product line, (3) the addition of a service
contract product line, (4) the increase in the number of and the revenue growth
of existing US Lithotripsy partnerships and (5) the increase in lease revenues
from corporate-owned equipment.
Salaries, Wages and Benefits: Salaries, wages and benefits increased
from $1,600,699 for the nine months ended September 30, 1999 to $1,619,602 for
the nine months ended September 30, 2000, an increase of 1%. This minimal
increase is due to the Company's maintenance of a relatively consistent staff
except for service technicians and engineers.
General and Administrative Expenses: General and administrative
expenses increased from $3,021,850 for the nine months ended September 30, 1999
to $4,930,214 for the nine months ended September 30, 2000, an increase of 64%.
This increase is attributable to (1) additional expenses related to the
operation of the lithotripsy venture purchased in January 2000, (2) additional
professional and filing expenses as a result of being a publicly held company
and (3) an increase in general operating expenses due to the growth of the
Company.
Equity in Earnings of Unconsolidated Partnerships: Equity in earnings
of unconsolidated partnerships increased from $83,728 for the nine months ended
September 30, 1999 to $125,880 for the nine months ended September 30, 2000, an
increase of 50%. This increase is primarily attributable to the growth of two
equity-based US Lithotripsy partnerships in which the Company invested during
1999.
Minority Interest: Minority interest increased from $3,604,390 for the
nine months ended September 30, 1999 to $5,240,545 for the nine months ended
September 30, 2000, an increase of 45%. This increase is attributable to the
addition of consolidated subsidiaries with new minority investors as well as the
income growth of the new and existing subsidiaries.
Interest Expense: Interest expense increased from $250,627 for the nine
months ended September 30, 1999 to $288,732 for the nine months ended September
30, 2000, an increase of 15%. This increase is attributable to the debt of
partnerships the Company invested in during the first nine months of 2000.
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Interest Income: Interest income increased from $1,321 for the nine
months ended September 30, 1999 to $174,571 for the nine months ended September
30, 2000. This increase is due to the investment of excess cash balances
resulting from initial public offering completed during the third quarter of
1999.
Partnership Distributions from Cost - Based Investments: Partnership
distributions from cost - based investments increased from $95,376 for the nine
months ended September 30, 1999 to $271,743 for the nine months ended September
30, 2000, an increase of 185%. This increase is attributable to the four cost -
based partnership investments added during the fourth quarter of 1999 and the
growth in distributions by existing partnerships accounted for on the cost
basis.
Provision for Income Taxes: Provision for income taxes increased from
$905,623 for the nine months ended September 30, 1999 to $1,527,793 for the nine
months ended September 30, 2000, an increase of 69%. The increase is
attributable to the increase in taxable income over the first nine months of
1999.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Net Revenue: Net revenue increased from $6,849,538 for the three months
ended September 30, 1999 to $9,025,518 for the three months ended September 30,
2000, an increase of 32%. This increase is attributable to (1) the acquisition
of Health Horizons in January 2000, (2) the addition of the LithoTron Ultra
product line, (3) the addition of a service contract product line, (4) the
increase in the number of and the revenue growth of existing US Lithotripsy
partnerships and (5) the increase in lease revenues from corporate-owned
equipment.
Cost of Goods Sold, Rentals and Services Provided: Cost of goods sold,
rentals and services provided increased from $2,584,308 for the three months
ended September 30, 1999 to $3,325,176 for the three months ended September 30,
2000, an increase of 29%. This increase is attributable to the related costs
associated with (1) the acquisition of Health Horizons in January 2000, (2) the
addition of the LithoTron Ultra product line, (3) the addition of a service
contract product line (4) the increase in the number of and the revenue growth
of existing US Lithotripsy partnerships and (5) the increase in lease revenues
from corporate-owned equipment.
Salaries, Wages and Benefits: Salaries, wages and benefits increased
from $533,094 for the three months ended September 30, 1999 to $555,712 for the
three months ended September 30, 2000, an increase of 4%. This increase is
primarily attributable to the 2000 third quarter addition of personnel as a
result of the OssaTron FDA approval.
General and Administrative Expenses: General and administrative
expenses increased from $1,138,407 for the three months ended September 30, 1999
to $1,606,399 for the three months ended September 30, 2000, an increase of 41%.
This increase is attributable to (1) additional expenses related to the
operation of the lithotripsy venture purchased in January 2000, (2) additional
professional and filing expenses as a result of being a publicly held company
and (3) an increase in general operating expenses due to the growth of the
Company.
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Equity in Earnings of Unconsolidated Partnerships: Equity in earnings
of unconsolidated partnerships increased from $38,865 for the three months ended
September 30, 1999 to $48,631 for the three months ended September 30, 2000, an
increase of 25%. This increase is attributable to the growth of two equity-based
US Lithotripsy partnerships in which the Company invested during 1999.
Minority Interest: Minority interest increased from $1,743,993 for the
three months ended September 30, 1999 to $2,347,223 for the three months ended
September 30, 2000, an increase of 35%. This increase is attributable to the
addition of consolidated subsidiaries with new minority investors as well as the
income growth of the new and existing subsidiaries.
Interest Expense: Interest expense increased from $76,590 for the three
months ended September 30, 1999 to $106,646 for the three months ended September
30, 2000, an increase of 39%. This increase is attributable to the increase in
certain long - term debt of HealthTronics.
Interest Income: Interest income increased from $0 for the three months
ended September 30, 1999 to $66,843 for the three months ended September 30,
2000. This increase is due to the investment of excess cash balances resulting
from the initial public offering completed during the third quarter of 1999.
Partnership Distributions from Cost - Based Investments: Partnership
distributions from cost - based investments increased from $41,143 for the three
months ended September 30, 1999 to $111,240 for the three months ended
September 30, 2000, an increase of 170%. This increase is attributable to the
addition of four cost - based partnership investments during the fourth quarter
of 1999 and the growth in distributions by existing partnerships accounted for
on the cost basis.
Provision for Income Taxes: Provision for income taxes increased from
$365,437 for the three months ended September 30, 1999 to $542,387 for the three
months ended September 30, 2000, an increase of 48%. The increase is
attributable to the increase in taxable income over the first nine months of
1999.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have satisfied our working capital and capital
spending needs through private placements and the sales of medical devices.
Subsidiary partnership equipment financing has typically been provided by term
bank debt secured by the related devices and guarantees from the various
partners, including HealthTronics. In July 1998 we obtained a $650,000 line of
credit and a $1,000,000 equipment financing line with a Tennessee bank. On July
31, 1999 HealthTronics renewed the Tennessee bank financing through June 30,
2000 with an increase in the line of credit availability from $650,000 to
$1,200,000. Effective June 30, 2000 the Tennessee bank replaced the Company's
$1,200,000 line of credit and $1,000,000 equipment financing with a $5,000,000
line of credit, maturing April 30, 2001. At September 30, 2000, we have
$1,383,324 outstanding under this line of credit. All other borrowings are
similar to those in place at December 31, 1999.
In January 2000, the Company negotiated a seven-year lease for
office/warehouse space
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at a monthly rental expense of $17,800 (straight-line) that expires in March
2007. The rental payments of $10,300 began in April 2000, when the Company took
occupancy, and increase over the life of the lease.
CAUTIONARY STATEMENTS
Included in this report are forward-looking statements that reflect
management's current outlook for future periods. As always, these expectations
and projections are based on currently available competitive, financial, and
economic data, along with operating plans, and are subject to future events and
uncertainties.
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PART II. Other Information
Item 2. Changes in Securities and Use of Proceeds
On September 30, June 30 and March 31, 2000 an additional 380, 1,118
and 1,182, respectively, restricted shares of the Company's common stock were
issued to a consultant for services rendered to the Company during the period in
a transaction exempt under Section 4(2) of the Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index on Page 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
HEALTHTRONICS, INC.
By:/s/ Victoria W. Beck
------------------------------------
Victoria W. Beck
Chief Financial Officer
Date: November 13, 2000
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HEALTHTRONICS, INC.
INDEX TO EXHIBITS
No. Exhibit
27 Financial Data Schedule, September 30, 2000 (for SEC use only)
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