FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 333-15557
PRIME SERVICE, INC.
DELAWARE 76-0452435
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16225 Park Ten Place, Suite 200
HOUSTON, TEXAS 77084
(Address of principal executive offices)
(713) 578-5600
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports 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 [ ]
As of May 15, 1997, 27,991,714 shares of Common Stock of Prime Service, Inc. are
outstanding.
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PRIME SERVICE, INC.
Part I. Financial Information Page
----
Item 1. Condensed Financial Statements:
Condensed Balance Sheet
March 31, 1997 and December 31, 1996 ........................ 3
Condensed Statement of Operations
For the three months ended March 31, 1997 and 1996 .......... 4
Condensed Statement of Cash Flows
For the three months ended March 31, 1997 and 1996 .......... 5
Notes to Condensed Financial Statements ..................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 10
Part II. Other Information
Item 1. Legal Proceedings ........................................... 15
Item 2. Changes in Securities ....................................... 15
Item 3. Defaults Upon Senior Securities ............................. 15
Item 4. Submission of Matters to a Vote of Security Holders ......... 15
Item 5. Other Information ........................................... 15
Item 6. Exhibits and Reports ........................................ 15
Signatures .............................................................. 16
Exhibit Index ........................................................... 17
2
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PRIME SERVICE, INC.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
CONDENSED BALANCE SHEET
(IN THOUSANDS)
March 31,
1997 December 31,
(Unaudited) 1996
------------ ------------
ASSETS
Cash and cash equivalents ......................... $ 1,267 $ 10,161
Accounts receivable, net .......................... 50,127 48,225
Inventories ....................................... 28,066 23,192
Rental equipment, net ............................. 302,517 268,992
Property, plant and equipment, net ................ 37,547 33,857
Cost in excess of fair value of net
assets acquired, net .......................... 130,884 130,116
Other assets ...................................... 14,595 14,040
------------ ------------
Total assets .................................. $ 565,003 $ 528,583
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable .................................. $ 20,469 $ 17,146
Accrued expenses .................................. 24,982 24,810
Debt .............................................. 238,200 214,700
Deferred income taxes ............................. 34,094 34,181
Other liabilities ................................. 9,882 7,718
Common stockholders' equity:
Common stock, $.01 par value, 100,000 shares
authorized and 27,992 shares outstanding ...... 280 280
Additional paid-in capital ........................ 236,745 236,745
Accumulated surplus / (deficit) ................... 351 (6,997)
------------ ------------
Common stockholders' equity ................... 237,376 230,028
------------ ------------
Total liabilities and stockholders' equity .... $ 565,003 $ 528,583
============ ============
The accompanying notes are an integral part
of the condensed financial statements.
3
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PRIME SERVICE, INC.
Condensed Financial Statements
(Continued)
CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
For The
Three Months Ended
March 31,
-------------------
1997 1996
------- -------
Revenues:
Rental revenue ..................................... $49,643 $40,461
New equipment sales ................................ 11,278 10,497
Rental equipment sales ............................. 8,194 6,905
Parts and merchandise sales ........................ 10,217 9,126
Service and other income ........................... 5,292 3,941
------- -------
84,624 70,930
------- -------
Cost of sales:
Depreciation - rental equipment .................... 9,129 7,904
Cost of new equipment sales ........................ 9,401 8,803
Cost of rental equipment sales, net of
accumulated depreciation ........................ 5,085 6,604
Cost of parts and merchandise sales ................ 7,293 6,718
Direct operating expenses .......................... 22,888 17,541
------- -------
53,796 47,570
------- -------
Gross profit ....................................... 30,828 23,360
------- -------
Selling, general, administrative and other expenses .... 12,015 10,821
Depreciation and amortization:
Noncompete agreements .............................. 56 0
Cost in excess of fair value of assets, acquired ... 850 774
Property, plant and equipment ...................... 857 687
------- -------
Operating income ....................................... 17,050 11,078
Interest expense, net of interest income ............... 6,093 8,471
------- -------
Income before income taxes ......................... 10,957 2,607
Income tax expense ..................................... 3,609 1,371
------- -------
Net income ......................................... $ 7,348 $ 1,236
======= =======
Net income per common share ............................ $ 0.26 $ 0.06
======= =======
Weighted average common shares outstanding ............. 28,207 19,231
======= =======
The accompanying notes are an integral part
of the condensed financial statements.
4
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PRIME SERVICE, INC.
Condensed Financial Statements
(Continued)
CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
For The
Three Months Ended
March 31,
--------------------
1997 1996
-------- --------
OPERATING ACTIVITIES:
Net income ............................................. $ 7,348 $ 1,236
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................. 10,892 9,365
Deferred income tax provision .................. (87) 391
Net gain on sale of rental equipment and
property, plant and equipment ................ (2,864) (158)
Effect of changes in operating assets
and liabilities, net of effects
from Acquisitions:
Increase in accounts receivable ................ (1,546) (2,511)
Increase in inventories ........................ (4,613) (3,661)
Decrease in other assets ....................... 819 702
Increase in accounts payable, accrued
expense and other liabilities ................ 5,659 4,177
-------- --------
Net cash provided by operating activities ...... 15,608 9,541
-------- --------
INVESTING ACTIVITIES:
Additions to rental equipment ...................... (39,731) (29,482)
Additions to property, plant and equipment ......... (3,378) (1,071)
Payments of acquisition costs ...................... (89) 0
Acquisitions, net of cash acquired ................. (12,972) (66,503)
Proceeds from sales of rental equipment ............ 8,166 6,881
Proceeds from disposal of property, plant
and equipment .................................... 73 29
-------- --------
Net cash used in investing activities .......... (47,931) (90,146)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from revolving line of credit ......... 23,500 71,500
Proceeds from issuance of Common Stock ............. -- 9,400
Payment of financing costs ......................... (71) --
-------- --------
Net cash provided by financing activities ...... 23,429 80,900
-------- --------
Net (decrease) increase in cash and cash
equivalents .................................. (8,894) 295
Cash and cash equivalents at beginning of period 10,161 178
-------- --------
Cash and cash equivalents at end of period ..... $ 1,267 $ 473
======== ========
The accompanying notes are an integral part
of the condensed financial statements.
5
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PRIME SERVICE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements of Prime Service, Inc. ("Prime" or the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. During interim periods, Prime follows the accounting
policies set forth in its Annual Report on Form 10-K (The "Form 10-K") filed
with the Securities and Exchange Commission. Users of financial information
produced for interim periods are encouraged to refer to the footnotes contained
in the Annual Report to Stockholders when reviewing interim financial results.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation of Prime's
financial condition, operating results and cash flows for the interim periods
presented have been included. Operating results and cash flows for the quarter
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997.
2. The Company
The condensed financial statements of Prime Service, Inc., formerly Prime
Holding, Inc., include the accounts of Prime for the 1997 period and include the
accounts of Prime and its subsidiary for the prior period. Intercompany accounts
and transactions for the 1996 period are eliminated in consolidation. On
December 2, 1994, Prime acquired Primeco Inc. from a subsidiary of Artemis S.A.
(the "1994 Acquisition") through Prime's subsidiary Prime Acquisition Corp.
("PAC"). Immediately following the completion of the Acquisition, PAC merged
into Primeco Inc. ("Primeco"), as a result of which Primeco became a
wholly-owned subsidiary of Prime.
Until March 5, 1997, the Company operated through its wholly-owned
subsidiary, Primeco. On March 5, 1997, Primeco merged with and into the Company,
with the Company as the surviving corporation.
On February 26, 1996, Prime completed the purchase of all of the outstanding
stock of Vibroplant U.S., Inc. for $66.5 million, which included repayment of
the outstanding bank debt of Vibroplant U.S. After the closing, Vibroplant U.S.
merged into Primeco. Vibroplant U.S. (which operated as American Hi-Lift)
operated 17 rental locations in California, Texas, Florida, Louisiana, Ohio,
Alabama, South Carolina and Georgia. American Hi-Lift specialized in renting and
selling aerial lift equipment to industrial and commercial customers. In
conjunction with this transaction, certain existing Prime stockholders purchased
approximately 134,000 shares of Class A Common Stock, for net proceeds of $9.4
million ($.6 million was paid to Investcorp). Prime then used these funds, as
well as borrowings under its Senior Credit Facility to fund the transaction.
6
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PRIME SERVICE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Continued)
On July 29, 1996, Prime completed the purchase of substantially all of the
assets of Alpine Equipment Rentals and Supply Company, Inc. ("Alpine") for
approximately $11.4 million including convenants not to compete. Alpine operated
six rental yards oriented toward industrial equipment in the state of
Washington. The Company used borrowings under its revolving credit agreement to
fund the transaction.
On December 23, 1996, Prime completed the purchase of certain assets of
Skyreach Equipment, Inc. ("Skyreach") for $7.9 million including convenants not
to compete. Skyreach operated one rental yard in the state of Washington and one
in the state of Oregon. The Company used borrowings under its revolving credit
agreement to fund the transaction. The American Hi-Lift, Alpine and Skyreach
acquisitions are referred to in this Form 10-Q as (the "1996 Acquisitions").
The following pro forma statement of operations presents the result of
operations for the three month period ended March 31, 1996 as though the change
in controlling ownership of the 1996 Acquisitions had taken place on January 1,
1996, and assumes that there were no other changes in the operations of Prime.
The pro forma results are not necessarily indicative of the financial results
that might have occurred had the transaction included in the pro forma
statements actually taken place on January 1, 1996, or of future results of
operations.
(IN THOUSANDS)
PRO FORMA FOR
THREE MONTHS ENDED MARCH 1996
-----------------------------
Revenues ....................................... $75,789
-------
Net income ..................................... 1,478
-------
Net income per common share .................... $ 0.08
=======
On March 17, 1997 Prime purchased substantially all of the assets of
Shipmates, Ltd., d/b/a Rental Depot, for approximately $13.3 million. Shipmates,
Ltd. operated eight locations in the state of Virginia and served primarily
customers in the construction industry. The Company used borrowings under its
revolving credit agreement to fund the transaction.
3. Net Income Per Common and Common Equivalent Share
Net Income per common and common equivalent share is computed using the
weighted average number of shares of common stock and common stock equivalents
outstanding during each period. If dilutive, the effect of stock options,
treated as common stock equivalents, is calculated using the treasury stock
method.
7
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PRIME SERVICE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Continued)
4. Debt
Debt consists of the following (in thousands):
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
Senior term loan ................... $123,000 $123,000
Senior revolving credit loan ....... 48,500 25,000
Senior subordinated notes .......... 66,700 66,700
-------- --------
$238,200 $214,700
======== ========
The bank credit agreement provides for a $298.5 million senior credit
facility including a $123.5 million term loan and a $175 million revolving
credit facility. The term loan requires semiannual payments which began June 30,
1995, and extend through December 31, 2002. The outstanding balance under the
revolving credit facility and any amounts owed as a result of letters of credit
being funded become due November 29, 2001. The senior term loan and the senior
revolving credit loan are collateralized by substantially all the assets of the
Company. On March 6, 1995 the Company issued $100 million of 12.75% Senior
subordinated notes due March 1, 2005. Proceeds generated by the Company's
Initial Public Offering "IPO" in November of 1996 were used to retire $33.3
million of the Senior subordinated notes. A redemption penalty of $4.3 million
was incurred for the early redemption of these notes.
Maturities of debt are as follows at March 31, 1997 (in thousands):
MARCH 31,
---------
1997 $ 1,000
1998 11,000
1999 21,000
2000 25,000
2001 78,500
Thereafter 101,700
----------
$ 238,200
==========
5. Income Taxes
Prime's effective income tax rate was 32.9% for the three months ended March
31, 1997. Differences between the statutory rate and the effective tax rate
primarily are the result of amortization of cost in excess of fair value of
acquired assets, recognition of a $1.0 million nontaxable lawsuit settlement
which increased earnings, and the partial reduction of a deferred tax asset
valuation allowance for alternative minimum tax credit carryforwards. For the
three months ended March 31, 1996, the effective tax rate was 52.6%, which
differed from the statutory rate primarily due to amortization of cost in excess
of fair value of acquired assets.
8
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PRIME SERVICE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Continued)
6. Subsequent Acquisition
On April 30, 1997, Prime completed the purchase of certain assets of Star
Equipment Corporation ("Star") for $8.7 million including covenants not to
compete. Star operated seven rental yards in the state of Virginia. The Company
used borrowings under its revolving credit agreement to fund the transaction.
7. Recent Accounting Pronouncement
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share", was issued. This statement, which is required to be
adopted in the fourth quarter of fiscal 1997, establishes standards for
computing and presenting earnings per share ("EPS") and applies to entities with
publicly held common stock. This statement simplifies the standards for
computing EPS under existing accounting principles and makes it more comparable
to international accounting standards. This statement requires restatement of
all prior-period EPS data presented, however, management believes that the
adoption of this standard will not have a significant impact on the financial
statements.
9
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PRIME SERVICE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
ACQUISITIONS. On March 17, 1997, the Company purchased substantially all of
the assets of Shipmates, Ltd. (which operated as Rental Depot) for approximately
$13.3 million including covenants not to compete. Rental Depot operated eight
rental yards in Virginia oriented toward the construction industry. The Company
used funds under its revolving credit agreement to fund the transaction.
On April 30, 1997, Prime completed the purchase of certain assets of Star
Equipment Corporation ("Star") for $8.7 million including covenants not to
compete. Star operated seven rental yards in the state of Virginia. The Company
used borrowings under its revolving credit agreement to fund the transaction.
LEGAL SETTLEMENT. In February 1997 the Company signed a settlement agreement
which resulted in a $1.0 million increase in net income during the quarter ended
March 31, 1997.
RESULTS OF OPERATIONS
The following discussion compares the three months ended March 31, 1997 to
the three months ended March 31, 1996.
Total Revenues for the three months ended March 31, 1997 increased 19.3% to
$84.6 million, when compared to revenues of $70.9 million for the same period
for the prior year. This increase is primarily a result of higher rental
revenues, an increase in the sale of new equipment, parts and merchandise, as
well as the effect of the acquisitions of American Hi-Lift, Alpine and Skyreach
(the "1996 Acquisitions").
Rental Revenue for the three months ended March 31, 1997 increased 22.7% to
$49.6 million, when compared with the corresponding prior period rental revenues
of $40.5 million. This increase is the result of an increase in the average
amount of equipment available for rental and continued strong utilization of
rental equipment, plus the addition of equipment and rental yards associated
with the 1996 Acquisitions.
New Equipment Sales for the three months ended March 31, 1997 increased 7.4%
to $11.3 million, when compared with the corresponding prior period sales of
$10.5 million. This increase is due primarily to the 1996 Acquisitions.
10
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PRIME SERVICE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS - (Continued)
Rental Equipment Sales for the three months ended March 31, 1997 increased
18.7% to $8.2 million, when compared with the corresponding prior period sales
of $6.9 million. This increase was due primarily to a continued strong demand
for used rental equipment and Prime's efforts to dispose of older equipment
acquired from American Hi-Lift.
Parts and Merchandise Sales for the three months ended March 31, 1997
increased 12.0% to $10.2 million, when compared with the corresponding prior
period sales of $9.1 million. This increase correlates with higher rental
revenues and sales of new and used rental equipment.
Service and Other Income for the three months ended March 31, 1997 increased
34.3% to $5.3 million when compared with the corresponding prior period sales of
$3.9 million. This increase relates to the increase in rental revenue.
Gross Profit for the three months ended March 31, 1997 increased 32.0% to
$30.8 million, when compared with the corresponding prior period gross profit of
$23.4 million. The increase in gross profit is the result of increased revenues,
as previously discussed, with the most significant component being the $9.2
million increase in rental revenue. The three months ended March 31, 1996
included $3.1 million of cost related to the step-up in carrying value of the
rental fleet that existed at the date of the 1994 Acquisition. Gross Profit was
also impacted by direct operating expenses which increased by $5.3 million, or
30.5%, to $22.9 million from the prior period expense level of $17.5 million.
This increase also reflects continued expenses associated with the repairs and
maintenance costs associated with the refurbishing and upgrading of the fleet
acquired with the 1996 Acquisitions to Prime's standards.
Selling, General, Administrative and Other Expenses for the three months
ended March 31, 1997 increased 11.0% to $12.0 million, when compared with the
corresponding prior period expenses of $10.8 million. The increase reflects
higher sales commissions due to increased rental and sales revenue and expenses
associated with the inclusion of the 1996 Acquisitions into Prime's operations.
Interest expense (net of interest income) for the three months ended March
31, 1997 decreased 28.1% to $6.1 million, when compared with the corresponding
prior period interest expense of $8.5 million. The decrease reflects a lower
average outstanding balance under Prime's credit facility. Prime's indebtedness,
as of March 31, 1997, totaled $238.2 million, compared to $336.5 million as of
March 31, 1996, primarily due to the retirement of debt with proceeds generated
by the Company's initial public offering in the fourth quarter of 1996.
11
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PRIME SERVICE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS - (Continued)
Prime's effective income tax rate was 32.9% for the three months ended March
31, 1997. Differences between the statutory rate and the effective tax rate
primarily are the result of amortization of cost in excess of fair value of
acquired assets, recognition of a $1.0 million nontaxable lawsuit settlement
which increased earnings, and the partial reduction of a deferred tax asset
valuation allowance for alternative minimum tax credit carryforwards. For the
three months ended March 31, 1996, the effective tax rate was 52.6%, which
differed from the statutory rate primarily due to amortization of cost in excess
of fair value of acquired assets.
Net Income increased from $1.2 million for the three months ended March 31,
1996 to $7.3 million for the three months ended March 31, 1997. The increase
reflects the factors discussed above and also includes the effect of a legal
settlement (see Recent Developments) which increased net income by $1.0 million.
This amount was reflected in the Statement of Operations as a reduction in
direct operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities totaled $15.6 million (net of
effects from the purchase of Rental Depot) during the period ending March 31,
1997, compared to $9.5 million (net of effects from the purchase of American
Hi-Lift) for the period ending March 31, 1996. During the current period, cash
flow from operations was higher than net income primarily as a result of
adjustments to net income for non-cash expenses, such as depreciation and
amortization. Netted against these positive adjustments were increases in
accounts receivable and payments associated with increased inventories offset by
increases in accounts payable and accrued liabilities.
Prime's primary capital requirements were for the acquisitions of Rental
Depot, as well as the purchase of rental equipment to expand its business and to
replace rental equipment sold. The total purchases of rental equipment for the
three months ended March 31, 1997 were $39.7 million compared to $29.5 million
for the corresponding period for the prior year. Prime continually evaluates the
equipment in its rental fleet and periodically sells used equipment based on
that evaluation. Proceeds from the sale of used rental equipment totaled $8.2
million for the three month period ended March 31, 1997 compared to $6.9 million
for the corresponding prior year period.
The Company has no long-term minimum purchase commitments for rental
equipment. Management has budgeted $115.6 million of gross fleet capital
expenditures exclusive of acquisitions in 1997, of which approximately $66.3
million will be used to replace used rental equipment sold, with the remaining
amounts being a net increase in investment in rental fleet. These expenditures
will be offset by expected proceeds from the sale of used equipment of
approximately $43.7 million. The Company will utilize these capital expenditures
to expand the fleet at existing rental equipment yards, to satisfy
12
<PAGE>
PRIME SERVICE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS - (Continued)
the equipment needs of current and new Integrated Rental Management customers,
to provide for the equipment needs of new rental equipment yards, and to
maintain and grow the fleet at the rental yards recently acquired in connection
with the 1996 and 1997 acquisitions. The Company also expects to spend
approximately $7.8 million in 1997 on non-equipment related capital expenditures
consisting of buildings, land, furniture and fixtures and environmental capital
expenditures. In addition to the budgeted capital expenditures, the Company is
currently considering or negotiating several potential acquisitions pursuant to
confidentiality agreements, although the Company does not currently have any
definitive understandings or agreements with respect to potential acquisitions.
The Company expects to spend a significant amount of capital during 1997 on
acquisitions, with the exact amount dependent on a number of factors, including
finding sufficient, suitable acquisition candidates. Capital expenditures for
acquisitions that in the aggregate exceed $60 million would require approval of
the Company's lenders under its credit facility.
The Company's operations are subject to various environmental laws and
regulations. In order to comply with these requirements, the Company is engaged
in ongoing remediation, capital improvement and periodic compliance activities.
In 1996, Prime spent approximately $1.9 million on environmental matters,
including costs related to remediation, compliance and capital requirements, and
has budgeted approximately $3.8 million in 1997 for such matters. As of March
31, 1997, the Company had a reserve for environmental remediation of $6.4
million and related receivables from state trust fund programs and a seller of
equipment yards of $1.9 million.
Prime's management believes that its cash flows from operating activities,
proceeds from the sale of used rental equipment and its borrowing capacity under
the revolving credit facility (as of March 31, 1997 Prime had $121.2 million
available under its $175 million Revolving Credit Facility) will be sufficient
to finance its operations and anticipated capital expenditures through 1997.
Statements in this "Liquidity and Capital Resources" section which are not
historical facts, so-called "forward looking statements," are made pursuant to
the safe harbor provisions of Section 21E of the Securities Exchange Act of
1934, as amended. Such forward looking statements include statements regarding
the sufficiency of the Company's cash to meet expected capital expenditures and
interest expense. General economic conditions, Prime's ability to implement and
manage its growth strategy, changes in results of operations and the impact of
significant competition could all affect Prime's ability to finance its
operations, and expected capital expenditures and interest expense requirements.
In addition, the Company's primary source of funds for acquisitions will be debt
financing, principally under the Company's credit facility. As the Company's
indebtedness increases, the level of indebtedness could have important
consequences to the holders of the Common Stock, including the following: (i) an
increasing portion of the Company's cash flow will be used to pay principal and
interest
13
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PRIME SERVICE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS - (Continued)
on the Company's indebtedness, (ii) the ability of the Company to obtain
additional financing for working capital and other general purposes may be
impaired, and (iii) the Company's level of indebtedness may reduce its
flexibility to respond to changing business and economic conditions. Investors
are also cautioned that all forward looking statements involve risks and
uncertainties, including those detailed in the Company's other filings with the
Securities and Exchange Commission.
14
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PRIME SERVICE, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(None)
Item 2. Changes in Securities
(None)
Item 3. Defaults Upon Senior Securities
(None)
Item 4. Submission of Matters to a Vote of Security Holders
(None)
Item 5. Other Information
(None)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
(None)
15
<PAGE>
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.
PRIME SERVICE, INC.
MAY 15, 1997 /s/ BRIAN FONTANA
Brian Fontana
(Executive Vice
President, Chief
Financial Officer)
/s/ JOHN D. LATIMER
John D. Latimer
(Controller)
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
10.1 Amendment No. 1 to Employment Agreement, dated as of
December 31, 1996, between Primeco Inc. and Gerald E. Lane.
27.1 Financial Data Schedule
EXHIBIT 10.1
AMENDMENT NO. 1 TO EOMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (this "Agreement") is made and
entered into effective as of Decmeber 31, 1996 by and between Primeco Inc., a
Texas corporation ("Employer"), and Gerald E. Lane ("Employee").
WHEREAS, Employer and Employee entered into an Employment Agreement, dated
as of December 2, 1994 (the "Employment Agreement");
WHEREAS, to induce Employee to stay in the employ of Employer, Employer and
Employee desire to amend certain terms and conditions of the Employment
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINED TERMS. Capitalized terms not defined herein shall have the
meanings set forth in the Employment Agreement.
2. INCENTIVE COMPENSATION. Section 3.1 of the Employment Agreement is hereby
amended and restated in its entirety as follows:
"3.2 INCENTIVE COMPENSATION. In addition to the Base Salary provided for
in Section 3.1 hereof, Employee's bonus for calendar year 1996 shall equal
$70,130, to be paid by February 28, 1997."
3. TERMINATION OF EMPLOYMENT AGREEMENT. Upon payment of the incentive
compensation as set forth in Section 2 hereof, the Employment Agreement,
including without limitation Section 7 and 8 thereof, shall terminate and be of
no further force and effect, except that Employer shall pay to Employee Base
Salary through the date of such termination.
4. FUTURE EMPLOYMENT. Employer shall be free to continue to employ Employee
on an at-will basis without an employment contract upon such terms and
conditions as Employer and Employee agree.
5. OTHER TERMS AND CONDITIONS. Except as expressly amended or modified in
this Agreement, all terms and conditions of the Employment Agreement shall
remain in full force and effect, until the Employment Agreement terminates
pursuant to Section 3 hereof.
[SIGNATURES ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, each of the parties to the Agreement has executed and
delivered this Agreement as of the date first written above.
PRIMECO INC.
By: /s/ THOMAS E. BENNETT
Thomas E. Bennett
President
EMPLOYEE:
/s/ GERALD LANE
Gerald Lance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,267
<SECURITIES> 0
<RECEIVABLES> 50,127<F1>
<ALLOWANCES> 0
<INVENTORY> 28,066
<CURRENT-ASSETS> 79,460
<PP&E> 340,064<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 565,003
<CURRENT-LIABILITIES> 45,451
<BONDS> 238,200
0
0
<COMMON> 280
<OTHER-SE> 237,096
<TOTAL-LIABILITY-AND-EQUITY> 565,003
<SALES> 29,689
<TOTAL-REVENUES> 84,624
<CGS> 21,779
<TOTAL-COSTS> 53,796
<OTHER-EXPENSES> 19,871
<LOSS-PROVISION> 262
<INTEREST-EXPENSE> 6,093<F3>
<INCOME-PRETAX> 10,957
<INCOME-TAX> 3,609
<INCOME-CONTINUING> 7,348
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,348
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.26
<FN>
<F1> Net of allowance for doubtful accounts
<F2> Includes equipment for rent and is net of accumulated depreciation
<F3> Net of interest income
</FN>
</TABLE>
