<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 000-22313
AMERIPATH, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 65-0642485
- ---------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7289 GARDEN ROAD, SUITE 200, RIVIERA BEACH, FLORIDA 33404
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(561) 845-1850
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(Registrant's telephone number, including area code)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, former address and formal fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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 [ ]
The registrant had 20,969,397 shares of common stock, $.01 par value,
outstanding as of November 5, 1998.
<PAGE> 2
AMERIPATH, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1998 (Unaudited) and December 31, 1997 3
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1998 and 1997 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBITS 20
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERIPATH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,941 $ 397
Accounts receivable, net 31,891 23,520
Inventories 300 268
Other current assets 3,132 2,532
-------- --------
Total current assets 39,264 26,717
-------- --------
PROPERTY AND EQUIPMENT, NET 8,442 6,242
-------- --------
OTHER ASSETS:
Goodwill, net 123,227 100,371
Identifiable intangibles, net 159,520 133,420
Other 2,159 2,477
-------- --------
Total other assets 284,906 236,268
-------- --------
TOTAL ASSETS $332,612 $269,227
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 14,566 $ 11,869
Current portion of long-term debt 1,449 2,720
-------- --------
Total current liabilities 16,015 14,589
LONG-TERM LIABILITIES:
Revolving loan 110,345 6,605
Senior term loan -- 64,350
Subordinated notes 1,122 1,399
Deferred tax liability 35,667 37,467
-------- --------
Total liabilities 163,149 124,410
-------- --------
STOCKHOLDERS' EQUITY:
Common stock 208 196
Additional paid-in capital 145,931 134,590
Retained earnings 23,324 10,031
-------- --------
Total stockholders' equity 169,463 144,817
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $332,612 $269,227
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
AMERIPATH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET REVENUES $ 47,005 $ 27,808 $ 125,822 $ 73,129
OPERATING COSTS AND EXPENSES:
Cost of services 20,677 12,912 55,889 33,468
Selling, general and administrative expenses 8,093 4,990 20,880 13,577
Provision for doubtful accounts 4,843 2,917 12,887 7,244
Amortization expense 2,507 1,430 6,833 3,840
--------- --------- --------- ---------
Total operating costs and expenses 36,120 22,249 96,489 58,129
--------- --------- --------- ---------
INCOME FROM OPERATIONS 10,885 5,559 29,333 15,000
OTHER INCOME (EXPENSE):
Interest expense (2,097) (2,510) (5,714) (6,567)
Nonrecurring charge -- -- -- (1,289)
Other, net 13 (63) (155) (120)
--------- --------- --------- ---------
Total other expense (2,084) (2,573) (5,869) (7,976)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 8,801 2,986 23,464 7,024
PROVISION FOR INCOME TAXES 3,793 1,284 10,171 3,020
--------- --------- --------- ---------
NET INCOME $ 5,008 $ 1,702 $ 13,293 $ 4,004
========= ========= ========= =========
BASIC EARNINGS PER COMMON SHARE:
Basic earnings per common share $ 0.24 $ 0.25 $ 0.66 $ 0.62
========= ========= ========= =========
Basic weighted average shares outstanding 20,748 6,509 20,106 5,987
========= ========= ========= =========
DILUTED EARNINGS PER COMMON SHARE:
Diluted earnings per common share $ 0.23 $ 0.13 $ 0.64 $ 0.33
========= ========= ========= =========
Diluted weighted average shares outstanding 21,397 12,691 20,841 12,143
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
AMERIPATH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,293 $ 4,004
Adjustments to reconcile net income to net cash flows provided
by operating activities:
Depreciation and amortization 8,666 5,061
Gain on disposal of assets -- (17)
Deferred income taxes (2,800) (430)
Provision for doubtful accounts 12,887 7,244
Nonrecurring charge -- 1,289
Changes in assets and liabilities (net of effects of acquisitions):
Increase in accounts receivable (15,063) (9,914)
(Increase) decrease in inventories (32) 2
(Increase) decrease in other current assets (356) 123
Decrease in other assets 272 174
Increase in accounts payable and accrued expenses 347 13
-------- --------
Net cash provided by operating activities 17,214 7,549
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (2,930) (2,679)
Purchase of subsidiaries, net of cash acquired (41,907) (60,008)
Payments of contingent notes (6,089) (1,530)
-------- --------
Net cash used in investing activities (50,926) (64,217)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs (294) (973)
Offering costs -- (2,198)
Proceeds from exercise of stock options 162 --
Principal payments on long-term debt (1,352) (894)
Borrowings under senior term loan -- 65,000
Net borrowings (payments) under revolving loan 38,740 (6,105)
-------- --------
Net cash provided by financing activities 37,256 54,830
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,544 (1,838)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 397 2,262
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,941 $ 424
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
AMERIPATH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements, which include the
accounts of AmeriPath, Inc. and its Subsidiaries (collectively, the "Company"),
have been prepared in accordance with generally accepted accounting principles
for interim financial reporting and the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, the financial statements do not include all of
the information and notes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, such interim
financial statements contain all adjustments (consisting of normal recurring
items) considered necessary for a fair presentation of the Company's financial
position, results of operations and cash flows for the interim periods
presented. The results of operations and cash flows for any interim periods are
not necessarily indicative of results which may be reported for the full year.
The accompanying interim financial statements should be read in conjunction with
the audited consolidated financial statements, and the notes thereto, included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997, as filed with the Securities and Exchange Commission.
In order to maintain consistency and comparability between periods presented,
certain amounts have been reclassified in order to conform with the financial
statement presentation of the current period.
NOTE 2 - ACQUISITIONS
During the first nine months of 1998, the Company acquired or became affiliated
with 11 anatomic pathology practices located in Alabama, Florida, Indiana,
Mississippi, North Carolina, Texas and Wisconsin. The total consideration paid
by the Company in connection with these acquisitions included cash of $40.7
million and the issuance of 1,203,324 shares of common stock. In addition, the
Company issued additional purchase price consideration in the form of contingent
notes. With respect to six of the acquisitions, the amount of future payments
under the notes are contingent upon the achievement by the acquired practices of
certain levels of cumulative operating earnings (as defined) over periods
ranging from three to five years. To the extent that these six practices achieve
the maximum levels of cumulative operating earnings provided for under their
contingent notes, the Company would be required to make aggregate maximum
payments, including principal and interest, of $31.8 million over the next five
years. In four of the acquisitions, payments under the notes are contingent upon
the retention of certain hospital contracts for periods ranging from three to
five years. If the practices retain such hospital contracts for the full term of
the specified periods, the maximum aggregate payments of principal and interest
that the Company would be obligated to make under the contingent notes is $2.5
million.
The allocation of the purchase price of the 1997 acquisitions and the 1998
acquisitions (the "Acquisitions") is preliminary, while the company continues to
obtain the information necessary to determine the fair value of the assets
acquired and liabilities assumed. When the Company obtains final information,
management believes that adjustments, if any will not be material in relation to
the consolidated financial statements.
The accompanying financial statements include the results of operations of the
1998 acquisitions from the date acquired through September 30, 1998. The
following unaudited pro forma information presents the consolidated results of
the Company's operations and the results of operations of the Acquisitions for
the year ended December 31, 1997 and the six months ended September 30, 1998,
after giving effect to amortization of goodwill and identifiable intangible
assets, interest expense on long-term debt incurred in connection with these
acquisitions, and the reduced level of certain specific operating expenses
(primarily compensation and related expenses attributable to former owners) as
if the acquisitions had been consummated on January 1, 1997. Such unaudited pro
forma information is based on historical financial information with respect to
the Acquisitions and does not include operational or other changes which might
have been effected by the Company.
6
<PAGE> 7
AMERIPATH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The unaudited pro forma information for the nine months ended September 30, 1998
and the year ended December 31, 1997 presented below is for illustrative
information purposes only and is not indicative of results which would have been
achieved or results which may be achieved in the future (in thousands except per
share data).
Pro Forma (Unaudited)
---------------------------
Nine Months
Ended Year Ended
September 30, December 31,
1998 1997
------------- ------------
Net revenues $140,352 $177,303
======== ========
Net income $ 14,755 $ 15,151
======== ========
Net income per share (diluted) $ 0.69 $ 0.91
======== ========
NOTE 3 - INTANGIBLE ASSETS
Intangible assets and the related accumulated amortization and amortization
periods are set forth below (dollars in thousands):
<TABLE>
<CAPTION>
Amortization Periods
(Years)
--------------------------
September 30, December 31, Weighted
1998 1997 Range Average
------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Hospital contracts $ 116,065 $ 91,250 25-40 34.0
Physician client lists 46,158 43,321 18-30 21.8
Laboratory contracts 4,400 4,400 10 10.0
Management service agreement 2,559 -- 25 25.0
--------- ---------
169,182 138,971
Accumulated amortization (9,662) (5,551)
--------- ---------
Balance, net $ 159,520 $ 133,420
========= =========
Goodwill $ 128,968 $ 103,475 15-35 32.8
Accumulated amortization (5,741) (3,104)
--------- ---------
Balance, net $ 123,227 $ 100,371
========= =========
</TABLE>
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Liability Insurance - The Company is insured with respect to general liability
and medical malpractice risks on a claims made basis and has provided a reserve
for incurred but not reported incidents. In management's opinion, the ultimate
resolution of any unasserted claims is not expected to have a material adverse
effect on the Company's financial position or results of operations.
Healthcare Matters - The healthcare industry in general, and the services the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net revenues
are derived from payments made by government-sponsored health care programs,
principally Medicare and Medicaid, which are subject to audit and adjustments by
the applicable regulatory agencies. Failure to comply with applicable laws or
regulations, any unfavorable results from regulatory audits or adjustments, or
reductions in the amounts payable for the Company's services under
government-sponsored health care programs could have a material adverse effect
on the Company's financial position and results of operations.
7
<PAGE> 8
AMERIPATH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In addition, the Company has contracts to provide pathology services for 27
Columbia/HCA Healthcare Corporation ("Columbia") hospitals. Columbia has been
under government investigation for some time and is evaluating its operating
strategies; including the sale, spin-off or closure of certain hospitals. The
government's investigation of Columbia and Columbia's re-evaluation of its
operating strategies may adversely affect the Company, including but not limited
to, reduction of revenue, termination or non-renewal of existing contracts,
adverse publicity and/or difficulties obtaining new or expanded contracts.
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental information presents the non-cash impact on the
balance sheets of assets acquired and liabilities assumed in connection with the
acquisitions or affiliations consummated by the Company. The non-cash effect of
these investing activities for acquisitions consummated during the nine months
ended September 30, 1998 and 1997 (dollars in thousands) are as follows:
Nine Months Ended
September 30,
-----------------------
1998 1997
-------- --------
Assets acquired $ 58,730 $ 94,619
Liabilities assumed (4,935) (16,428)
Common stock issued (11,192) (19,259)
-------- --------
Cash paid 42,603 58,932
Less cash acquired (696) (199)
-------- --------
Net cash paid $ 41,907 $ 58,733
======== ========
NOTE 6 - CREDIT FACILITY
On April 28, 1998, the Company amended its credit facility with a syndicate of
banks led by BankBoston N.A. and NationsBank N.A., as lenders and co-agents
(collectively, the "Agents"). The amended facility provides for borrowings of up
to $200 million in the form of a revolving loan that may be used for working
capital purposes (in an amount limited to 75% of the Company's net accounts
receivable, as reflected on the Company's quarterly consolidated balance sheet)
and to fund acquisitions to the extent not otherwise used for working capital
purposes. The Company must comply with certain requirements as defined in the
credit agreement to utilize the credit facility to fund acquisitions.
All outstanding advances under the revolving loan are due and payable on April
30, 2003. Interest is payable monthly at variable rates which are based, at the
Company's option, on the Agents' base rate or the Eurodollar rate plus a premium
that is based on the Company's quarterly ratio of total debt to cash flow. The
amended credit facility also requires a commitment fee to be paid quarterly
equal to 0.25% of the annualized unused portion of the total commitment. All of
the Company's assets are pledged as collateral to secure borrowings under the
credit facility. The Company has used a portion of the funds available under the
amended credit facility to refinance previously outstanding indebtedness, to
fund acquisitions and for working capital purposes. The Company intends to use
the remaining availability for its acquisition program and working capital.
The amended credit facility contains covenants which, among other things,
require the Company to maintain certain financial operating ratios and impose
certain limitations or prohibitions on the Company with respect to the
incidence, guaranty or assumption of indebtedness, the payment of dividends,
cash distributions, new debt issuance, sale of assets, leasing commitments and
annual capital expenditures, and contains provisions which preclude mergers and
acquisitions under certain circumstances. As of September 30, 1998, the Company
was in compliance with all required financial covenants.
8
<PAGE> 9
AMERIPATH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 7 - EARNINGS PER SHARE
Earnings per share is computed and presented in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which the
Company adopted in the fourth quarter of 1997. Basic earnings per share, which
excludes the effects of any dilutive common equivalent shares that may be
outstanding, such as convertible preferred stock and stock options, is computed
by dividing income attributable to common stockholders by the weighted-average
number of common shares outstanding for the respective periods. Diluted earnings
per share gives effect to the potential dilution that could occur upon the
exercise of certain stock options or the conversion of certain convertible
preferred stock that were outstanding at various times during the respective
periods presented. The dilutive effects of convertible preferred stock are
calculated using the "as if converted" method and the dilutive effects of stock
options are calculated using the treasury stock method. All previously reported
earnings per share data has been restated in the accompanying financial
statements to reflect the requirements of SFAS No. 128.
Basic and diluted earnings per share for the respective periods are set forth in
the table below (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1998 1997 1998 1997
------- -------- ------- --------
<S> <C> <C> <C> <C>
Basic Earnings Per Common Share:
Net income $ 5,008 $ 1,702 $13,293 $ 4,004
Less preferred stock dividends -- (95) -- (284)
------- -------- ------- --------
Income attributable to common stockholders $ 5,008 $ 1,607 $13,293 $ 3,720
======= ======== ======= ========
Basic earnings per common share $ 0.24 $ 0.25 $ 0.66 $ 0.62
======= ======== ======= ========
Basic weighted average shares outstanding 20,748 6,509 20,106 5,987
======= ======== ======= ========
Diluted Earnings Per Common Share:
Net income $ 5,008 $ 1,702 $13,293 $ 4,004
======= ======== ======= ========
Diluted earnings per common share $ 0.23 $ 0.13 $ 0.64 $ 0.33
======= ======== ======= ========
Weighted average shares outstanding 20,748 6,509 20,106 5,987
Effects of convertible preferred stock -- 5,559 -- 5,559
Effects of dilutive stock options 649 623 735 597
------- -------- ------- --------
Diluted weighted average shares outstanding 21,397 12,691 20,841 12,143
======= ======== ======= ========
</TABLE>
Certain options outstanding as of September 30, 1998 were excluded from the
calculation of diluted earnings per share because their effect would have been
anti-dilutive. Such excluded options totaled 303,050 at a weighted-average
exercise price per share of $14.50 for the three months ended September 30,
1998, and 50,000 options at a weighted-average exercise price per share of
$16.73 for the nine months ended September 30, 1998.
NOTE 8 - NONRECURRING CHARGE
In May 1997, the Company withdrew its registration statement filed with the
Securities and Exchange Commission and postponed its planned initial public
offering of common stock. During the quarter ended June 30, 1997, the Company
recorded a nonrecurring charge of $1.3 million, primarily professional fees and
printing costs, which represented offering costs incurred prior to the
postponement that did not have a continuing benefit after the postponement.
9
<PAGE> 10
AMERIPATH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 9 - SUBSEQUENT EVENTS
Subsequent to September 30, 1998, the Company completed the acquisition of four
additional anatomic pathology practices. The Company acquired Texoma Pathology
Associates, P.A. located in Denison, Texas; Consultant Pathology Associates,
Inc. located in Youngstown, Ohio; Susan R. Baker, Ph. D., M.D., P.A. located in
Miami, Florida; and Pathology Consultants of Cleveland, Inc. located in
Cleveland, Ohio. Total consideration paid by the Company in connection with
these acquisitions included cash of approximately $14.1 million and the issuance
of 280,525 shares of common stock with an aggregate market value of
approximately $3.4 million. In addition, the Company issued additional purchase
price to the sellers in the form of contingent notes. The contingent notes
issued to two of the acquired practices are payable upon the achievement of
stipulated levels of cumulative operating earnings of such practices over a five
year period. With respect to the two other acquired practices, the contingent
notes are contingent upon the retention of certain hospital contracts for
specified periods up to five years.
10
<PAGE> 11
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
QUALIFICATION OF FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995. Statements contained in this report that are not limited to historical
information are considered forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are based largely on the
Company's expectations which are subject to a number of known and unknown risks,
uncertainties and other factors discussed in this report and in other documents
filed by the Company with the Securities and Exchange Commission (including,
without limitation, the Company's Annual report on Form 10-K for fiscal 1997),
which may cause actual results to be materially different from those
anticipated, expressed or implied by the forward-looking statements. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements to reflect future
events or circumstances.
In addition to the risks and uncertainties identified elsewhere herein and in
other documents filed by the Company with the Securities and Exchange
Commission, the following factors should be carefully considered when evaluating
the Company's business and future prospects: general economic conditions;
competition; success of the Company's operating initiatives and growth strategy;
healthcare regulation; payment and reimbursement rates under
government-sponsored healthcare programs; dependence upon specific pathologists;
labor and technology costs; advertising and promotional efforts; the
availability of pathology practices in appropriate locations that the Company is
able to acquire on suitable terms or develop and the overall success of the
Company's acquisition strategy. In addition, the Company's strategy to penetrate
and develop new markets involves a number of risks and challenges and there can
be no assurance that the healthcare regulations of the new states in which the
Company enters and other factors will not have a material adverse effect on the
Company. The factors which may influence the Company's success in each targeted
market in connection with this strategy include: the selection of appropriate
qualified practices; negotiation and execution of definitive acquisition and/or
affiliation, management services and/or employment agreements; the economic
stability of each targeted market; compliance with the healthcare and/or other
laws and regulations in each targeted market, including the regulation of the
healthcare industry in each targeted market on a national, regional and local
basis (including health, safety, waste disposal and zoning laws); compliance
with applicable licensing approval procedures; restrictions under labor and
employment laws, especially non-competition covenants; access to affordable
capital; governmental reimbursement and assistance programs and tax laws .
OVERVIEW
The Company is the leading physician practice management company focused on
anatomic pathology services, based on an analysis of geographic breadth, number
of physicians, number of hospital contracts, number of practices and net
revenues. As of September 30, 1998, the Company owned or was affiliated with 28
anatomic pathology practices (the "Practices") located in 10 states which
employed 203 pathologists. The pathologists provide medical services in 22
outpatient pathology laboratories owned and operated by the Company and in
inpatient laboratories for 109 hospitals and 36 outpatient surgery centers.
The Company manages and controls all of the non-medical functions of the
Practices, including: (i) recruiting, training, employing and managing the
technical and support staff of the Practices; (ii) developing, equipping and
staffing laboratory facilities; (iii) establishing and maintaining courier
services to transport specimens; (iv) negotiating and maintaining contracts with
hospitals, national clinical laboratories and managed care organizations and
other payors; (v) providing financial reporting and administration, clerical,
purchasing, payroll, billing and collection, information systems, sales and
marketing, risk management, employee benefits, legal, tax and accounting
services to the Practices; (vi) complying with applicable laws and regulations;
and (vii) with respect to the Company's ownership and
11
<PAGE> 12
operation of anatomic pathology laboratories, providing slide preparation and
other technical services. The Company is not licensed to practice medicine.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1997
The Company derives its net revenues from the Practices it owns or manages. The
Company typically bills government programs (principally Medicare and Medicaid),
indemnity insurance companies, managed care organizations, national clinical
laboratories, physicians and patients on a fee-for-service basis. Net revenues
differ from amounts billed for services due to: (i) Medicare and Medicaid
reimbursement rates which are established annually; (ii) payments from managed
care organizations at discounted fee-for-service rates; (iii) negotiated
reimbursement rates with other third party payors; (iv) negotiated rates under
sub-contracts with national clinical laboratories; and (v) other discounts and
other allowances, principally from private pay accounts.
The majority of services furnished by the Company's pathologists are anatomic
pathology services. Reimbursements from Medicare for these services represented
approximately 22.8% of the Company's cash collections for the nine months ended
September 30, 1998. Effective January 1, 1992, Medicare started reimbursing all
physician services, including anatomic pathology services, based on a
methodology known as the Resource-Based Relative Value System ("RBRVS"), which
was fully phased in by 1996. Overall, anatomic pathology reimbursement rates
declined during the fee schedule phase-in period, despite an increase in payment
rates for certain pathology services performed by the Company.
In June 1998, the Federal Health Care Financing Administration ("HCFA")
published proposed regulations that would recalculate a key component of the
RBRVS to reflect resource consumption rather than historical charge data. Two
alternative approaches to such calculation were proposed in the regulations and
a final decision is expected later this year, with the new fee schedules to be
phased in over the period from 1999 to 2002. On November 2, 1998, HCFA announced
a move to a single conversion factor, which is an integral part of the formula
for the reimbursement of pathology fees. Such change could result in a potential
13% decrease in Medicare reimbursement which will be the phased in over the next
four years. The actual fee schedules for 1999 have not been officially released.
Therefore, the impact of this proposed methodology on the Company's Medicare
revenues cannot be determined at this time; and will depend on the final
approach selected, changes to other factors in the RBRVS reimbursement
computation and the relative mix of pathology services furnished by the Company.
Other potential changes in government and third-party payer reimbursement rates
resulting from federal, state or local legislation, along with the impact of
developments in managed care and other market pressures, may also create
downward pressure on reimbursement rates and make the market for the Company's
services more competitive, which could adversely impact the Company's gross
profits. For further information regarding the complex area of reimbursement,
refer to the discussion in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as previously filed with the Securities and Exchange
Commission.
During the first nine months of 1998, the Company acquired a total of 11
anatomic pathology practices, the operating results of which are included in the
accompanying financial statements from the effective acquisition dates. Changes
in operations between the three and nine-month periods ended September 30, 1998
and 1997 are due primarily to the various acquisitions which were consummated by
the Company subsequent to June 30, 1997, because the Company did not acquire any
practices during the first six months of 1997. References to "same practice"
means those practices at which the Company provided services for the entire
period of which the amount is calculated and the entire prior comparable period.
NET REVENUES
Net revenues increased to $125.8 million for the nine months ended September 30,
1998, up $52.7 million or 72.1% from revenues of $73.1 million reported for the
comparable period in 1997. Same practice net revenues increased $7.6 million or
10.8% to $77.7 million for the nine months ended September 30, 1998 from $70.1
million for the nine months ended September 30, 1997. The increase in same
practice net revenues was due primarily to a $6.0 million increase in outpatient
net revenues and a $1.6 million increase
12
<PAGE> 13
attributable to an increase in Medicare reimbursement rates. The increase in
same practice net revenue resulted primarily from the expansion of a contract
with a national clinical laboratory which increased same practice net revenue by
$3.4 million. Same practice net revenues derived from hospital contracts
remained unchanged. The remaining increase of $45.1 million was from the
operations of practices acquired subsequent to June 30, 1997.
Net revenues for the three months ended September 30, 1998, were $47.0 million,
an increase of $19.2 million or 69.0% from the $27.8 million reported for the
same period in 1997. Same practice net revenues increased by $1.2 million or
4.8%, attributable primarily to an increase in outpatient revenues, and to a
lesser extent, an increase in the Medicare reimbursement rates. The remaining
increase of $18.0 million was due principally to the results of operations of
acquisitions completed since June 30, 1997.
As of September 30, 1998, the Company had contracts to provide pathology
services to 27 hospitals owned by Columbia, which accounted for approximately
18.1% of the Company's consolidated net revenues for the nine months ended
September 30, 1998. In addition, the Company has contracts with SmithKline
Beecham Laboratories, Inc. ("SmithKline") to provide pathology services. For the
nine months ended September 30, 1998, approximately 7.9% of the Company's
consolidated net revenues were derived from such contracts with SmithKline.
Generally, the contracts with Columbia and SmithKline have terms of less than
five years and may or may not contain renewal provisions. Some of the contracts
contain provisions that allow for termination by either party with relatively
short notice. Although the Company, through its acquired practices, has
maintained ongoing relationships with these hospitals and SmithKline for
extended periods of time, the termination of one or more of these contracts
could have a material adverse effect on the Company's consolidated financial
position and results of operations.
COST OF SERVICES
Cost of services increased by $22.4 million, or 67.0%, to $55.9 million for the
nine months ended September 30, 1998 from $33.5 million for the same period in
1997. Of this increase, $4.6 million was attributable to same practice growth
and $17.8 million from the Acquisitions which occurred during or subsequent to
the nine months ended September 30, 1997. The gross margin on the same practice
revenue for the nine months ended September 30, 1998, was approximately 52.4% as
compared to the Company's consolidated gross margin of approximately 55.6% due
primarily to a lower fee schedule on an expanded contract with a national
clinical laboratory.
Cost of services increased by $7.8 million, or 60.1%, to $20.7 million for the
three months ended September 30, 1998 from $12.9 million for the same period in
1997. Of this increase, $0.6 million was attributable to same practice growth
and $7.2 million from the Acquisitions which occurred during or subsequent to
the three months ended September 30, 1997. Gross margins on same practice
revenues were relatively flat at 52.3% and 52.4% for the three month periods
ended September 30, 1998 and 1997, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by $7.3 million to $20.9
million for the nine months ended September 30, 1998 from $13.6 million for the
comparable period of 1997. Of this increase, approximately $3.5 million was due
to the expansion of the Company's administrative support infrastructure in areas
such as increased staffing levels in marketing, billing, human resources and
accounting. The remainder of the increase was attributable to operations and
expansion of the practices acquired by the Company since June 30, 1997. As a
percentage of consolidated net revenues, selling, general and administrative
expenses decreased to 16.6% for the nine months ended September 30, 1998 as
compared to 18.6% for the same period of 1997, as the Company continues to
control such costs and leverage its overhead over a larger revenue base.
For the three months ended September 30, 1998, selling, general and
administrative expenses were $8.1 million, which reflects an increase of $3.1
million or 62.2% from the $5.0 million reported for the same period in 1997.
Approximately $1.3 million of this increase was attributable to same practice
operations
13
<PAGE> 14
and $1.8 million to the practices acquired since June 30, 1997. Overall, the
increase in such expenses reflects costs associated with: strengthening the
Company's corporate infrastructure; consulting expenses incurred in connection
with an operations review of the Company's billing operations; the addition of
marketing personnel and other costs related to integrating the operations of
recently acquired practices; and certain costs incurred in determining the
feasibility of development and planning of an esoteric testing laboratory. As a
percentage of consolidated net revenues, selling, general and administrative
expenses were 17.2% and 17.9% for the three month periods ended September 30,
1998 and 1997, respectively.
PROVISION FOR DOUBTFUL ACCOUNTS
The provision for doubtful accounts increased by $7.2 million, or 9.9%, to $12.9
million for the nine months ended September 30, 1998, from $7.2 million for the
same period in 1997. The dollar increase is primarily due to the increase in net
revenues from the Acquisitions which occurred during or subsequent to the nine
months ended September 30, 1997. The provision for doubtful accounts as a
percentage of net revenues was 10.2% and 9.9% for the nine month periods ended
September 30, 1998 and 1997, respectively. The increase in the provision for
doubtful accounts, as a percentage of net revenues, was primarily attributable
to an overall increase in hospital based revenues. Hospital based pathology
practices generally have a higher provision for doubtful accounts due to a
larger concentration of indigent and private pay patients, more difficulties in
gathering complete and accurate billing information, and longer billing and
collection cycles.
The provision for doubtful accounts was $4.8 million or 10.3% of net revenues
for the three months ended September 30, 1998, compared to $2.9 million or 10.5%
of net revenues for the same period in the prior year.
AMORTIZATION EXPENSE
Amortization expense increased by $3.0 million or 77.9% to $6.8 million for the
nine months ended September 30, 1998, from $3.8 million for the same period of
1997. The increase is primarily attributable to the amortization of goodwill and
other identifiable intangible assets recorded in connection with the acquisition
of the anatomic pathology practices subsequent to June 30, 1997, and payments
made on the contingent notes. Amortization expense is expected to increase in
the future as a result of additional identifiable intangible assets and goodwill
arising from future acquisitions, and any payments required to be made pursuant
to the contingent notes issued in connection with acquisitions.
Amortization expense increased to $2.5 million for the three months ended
September 30, 1998, up $1.1 million or 75.3%, from the $1.4 million recorded for
the same quarterly period of 1997. The increase is attributable to acquisitions
and payments under contingent notes, as reflected above in the discussion on the
nine-month periods.
The Company continually evaluates whether events or circumstances have occurred
that may warrant revisions to the carrying values of its goodwill and other
identifiable intangible assets, or to the estimated useful lives assigned to
such assets. Any significant impairment recorded on the carrying values of the
Company's goodwill or other identifiable intangible assets could have a material
adverse effect on the Company's consolidated financial position and results of
operations.
INCOME FROM OPERATIONS
Income from operations increased $14.3 million or 95.6%, to $29.3 million for
the first nine months of 1998, compared to $15.0 million in the same period of
1997. As a percentage of consolidated net revenues, income from operations was
23.3% and 20.5% for the nine month periods ended September 30, 1998 and 1997,
respectively.
For the three months ended September 30, 1998, income from operations was $10.9
million, reflecting an increase of $5.3 million or 95.8%, from the $5.6 million
recorded for the same period of 1997. As a
14
<PAGE> 15
percentage of net revenues, income from operations was 23.2% and 20.0% for the
three month periods ended September 30, 1998 and 1997, respectively.
NONRECURRING CHARGE
The Company wrote-off certain deferred offering costs aggregating approximately
$1.3 million during the nine months ended September 30, 1997. Such deferred
costs were comprised of professional fees, printing charges and various other
costs related to a registration statement that the Company had previously filed
with the Securities and Exchange Commission in connection with its planned
initial public offering of common stock. The registration statement was
subsequently withdrawn when the Company postponed the date of its planned
initial public offering.
OTHER INCOME (EXPENSE)
Interest expense decreased by $0.9 million or 13.0%, to $5.7 million for the
nine months ended September 30, 1998, from $6.6 million for the same period in
1997. The majority of this decrease was attributable to the lower average amount
of debt outstanding during the first nine months of 1998 as compared to the
first nine months of 1997 and to more favorable interest rates under the
Company's amended $200 million credit facility. The Company's effective annual
interest rate on the credit facility was 6.9% at September 30, 1998.
Interest expense decreased by $0.4 million or 16.5%, to $2.1 million for the
three months ended September 30, 1998, from $2.5 million reported for the same
period in 1997.
PROVISION FOR INCOME TAXES
The effective income tax rate was 43.3% for the nine month period ended
September 30, 1998, as compared to 43.0% for the nine month period ended
September 30, 1997. The increase in the Company's effective tax rate was
primarily due to the non-deductibility of amortization expense relating to
intangible assets from certain of its acquisitions.
The effective income tax rate was approximately 43.1% for the three month period
ended September 30, 1998, as compared to approximately 43.0% for the three month
period ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had working capital of approximately $23.2
million, an increase of $11.1 million from the working capital of $12.1 million
available at December 31, 1997. The increase in working capital was due
primarily to increases in net accounts receivable of $8.4 million and cash of
$3.5 million, a decrease in the current portion of long-term debt of $1.3
million, offset in part by an increase in accounts payable and accrued expenses
of $2.7 million.
For the nine-month periods ended September 30, 1998 and 1997, cash flows from
operations were $17.2 million and $7.5 million, respectively. For the nine
months ended September 30, 1998, the cash flow from operations and borrowings
under the Company's credit facility were used primarily to: (i) fund the $40.7
million cash portion of acquisitions completed during the period; (ii) make
additional payments of $7.3 million in connection with acquisitions (or
affiliations) completed prior to January 1, 1998, including contingent note
payments of $6.1 million; and (iii) acquire $2.9 million of property and
equipment, primarily laboratory equipment and information systems as the Company
continues to upgrade its billing and financial reporting systems.
On April 28, 1998, the Company amended its credit facility with a syndicate of
banks led by BankBoston N.A. and NationsBank N.A., as lenders and co-agents
(collectively, the "Agents"). The amended facility provides for borrowings of up
to $200 million in the form of a revolving loan that may be used for working
capital purposes (in an amount limited to 75% of the Company's net accounts
receivable, as reflected on the Company's quarterly consolidated balance sheet)
and to fund acquisitions to the extent not otherwise
15
<PAGE> 16
used for working capital purposes. All outstanding borrowings under the credit
facility, which are secured by substantially all of the Company's assets, are
due and payable on April 30, 2003. Interest is payable monthly at variable rates
which are based, at the Company's option, on the Agents' base rate or the
Eurodollar rate plus a premium that is adjusted based on the Company's quarterly
ratio of total debt to cash flow. The amended credit facility also requires a
commitment fee to be paid quarterly equal to 0.25% of the annualized unused
portion of the total commitment. The Company has used a portion of the funds
available under the amended credit facility to refinance previously outstanding
indebtedness, to fund acquisitions and for working capital purposes. The Company
intends to use the remaining availability for its acquisition program and
working capital.
The Company anticipates that its cash flows from operations, together with funds
available under the credit facility and cash on-hand, will be sufficient to meet
its working capital requirements, finance any required capital expenditures and
fund planned acquisitions for at least the next twelve months. With respect to
the deployment of its long-term growth strategy, the Company may be required to
seek additional financing through: increases in availability under the existing
credit facility; negotiation of credit facilities with other banks; or public
offerings or private placements of equity or debt securities. No assurances can
be given that the Company will be able to increase availability under its
existing credit facility, secure additional bank borrowings or complete
additional debt or equity financing on terms favorable to the Company or at all.
YEAR 2000 ISSUES
The Year 2000 issue is a result of computer programs or chipsets being written
using two digits rather than four to define the applicable year. Computer
programs that have time sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculation causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar activities.
The Company is continually working to resolve the potential risks and concerns
of the Year 2000 issue. The Company has made progress in assessing, remediating,
testing and implementing systems to be Year 2000 ready. The Company has a
comprehensive working assessment for both information technology and
non-information technology systems within the majority of its existing practices
and is assessing its other practices. When acquiring new practices, the Company
will assess the Year 2000 risk and compliance as part of the due diligence
process. The Company has substantially completed the assessment phase for most
of its practices. The Company classifies all systems into categories of
importance: mission-critical, business critical and non-critical. The Company
plans to complete its remediation, validation and implementation of its
multi-phase plan by June 30, 1999.
The Company's Year 2000 phases to correct most information technology and
non-information technology systems are as follows:
Awareness: The continuous process of promoting awareness of the Year 2000
issue across the Company, including communications to the executives
and the Board of Directors.
Assessment: INVENTORY - The physical inventory of all information technology
and non-information technology hardware, software and
embedded systems.
READINESS - Determination of whether hardware and software
are Year 2000 ready or if renovation is required.
RISK - To determine the risk tradeoffs and contingencies
needed.
BUSINESS PARTNERS, VENDORS AND PAYORS - Determination whether they
are Year 2000 compliant.
Remediation: The installation of software or hardware upgrades, replacements or
renovations to be Year 2000 ready.
16
<PAGE> 17
Validation: To generate approved test plans, perform tests and produce results
for Year 2000 certification and signoff.
Implementation: Systems are Year 2000 ready.
The Company is currently determining the majority of the risks and contingencies
for third-party payors, strategic partners, vendors, contracted hospitals, large
commercial payors (e.g. Medicare, Blue Cross/Blue Shield and Cigna) and facility
safety systems. The Company has initiated dialogue with its key vendors and
customers, including hospitals and third-party payors, to determine the extent
of any exposure that the Company may have with respect to failure on the part of
such third parties to become Year 2000 compliant. The Company is working
directly with all strategic partners and third-parties to avoid any business
interruptions in the year 2000. There can be no assurance that the computer
systems of such external parties upon which the Company is dependent, including
third-party payors, will become compliant in a timely manner; and that such lack
of compliance will not have an adverse effect on the Company's systems, results
of operations or financial position.
The majority of the Company's costs to correct the Year 2000 issue stem from
professional services and hardware and software replacements. The cost of new
hardware or software purchased in this regard is capitalized and all other costs
associated with such remedial actions are expensed as incurred. The total cost
associated with the Company's Year 2000 project is estimated between $1.0
million and $1.6 million, which will be funded by cash flow generated by
operations and the Company's credit facility. The Company does not expect these
costs to have a material adverse effect on its results of operations or
financial position.
The Company believes that the most reasonable likely worst risk scenarios
relating to the Year 2000 could impact diagnosis reporting or bill generation
causing strategic partners, payors and patients from receiving medical and
billing information in a timely matter. The worst case scenarios could result in
such things as decreased cash flows, claims rejection and untimely diagnostic
reporting. The Company has developed contingency plans (i.e. identified
alternate systems and processing capabilities) for all internal systems which
are mission critical or business critical systems which are not expected to by
Year 2000 ready by March 31, 1999. The estimated Year 2000 costs include the
contingency plans and workarounds. The worst case scenarios could be the
replacement of entire laboratory information or billing systems due to its
inability to meet the Company's criteria of Year 2000 compliance.
The costs associated with the Company's efforts to become Year 2000 compliant
and the date it expects to complete the required modifications are based on
management's current estimates. Such estimates reflect numerous assumptions as
to future events, including the continued availability of required resources,
the Year 2000 readiness of practices acquired in the future, the reliability of
the compliance plans and actions of third parties and other factors. There can
be no assurance that the final costs of the Year 2000 compliance project will
not exceed the current estimates or that all systems, including those of planned
acquisitions, will be compliant by the anticipated compliance date. Specific
factors that might cause material differences in actual results include, but are
not limited to, the availability and cost of qualified personnel and other
required resources, the ability to identify and correct all relevant computer
codes, and similar uncertainties
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, the Company has become a party to and may in
the future be subject to pending and threatened legal actions and proceedings.
The majority of the pending legal proceedings involve claims of medical
malpractice, particularly cytology, which are generally covered by insurance.
The Company believes that the outcome of such legal actions and proceedings,
individually or in the aggregate, will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities - In connection with seven of the
acquisitions completed subsequent to January 1, 1998, the Company issued the
following shares of common stock:
<TABLE>
<CAPTION>
Effective Shares
Location Date Issued
-------- --------- ------
<S> <C> <C> <C>
Anatomic Pathology Associates, LLP Indianapolis, IN February 1, 1998 186,829
Plains Pathology Associates, P.A. Lubbock, TX June 1, 1998 182,320
Southwest Pathology Associates Lubbock, TX June 1, 1998 205,210
Drs. Rogers, White & Smith, M.D., P.A.
(d/b/a Indian River Pathology) Vero Beach, FL June 1, 1998 23,382
Severance & Associates, P.A. and
Pathology Affiliated Services, LLC Indianapolis, IN July 1, 1998 564,577
Shoals Pathology Associates, P.C. Muscle Shoals, AL August 18, 1998 17,277
H. Michael Jones, M.D., P.A. Henderson, NC August 18, 1998 23,729
</TABLE>
Subsequent to September 30, 1998, the Company issued shares of its common stock
in connection with the acquisition of two additional pathology practices,
Consultant Pathology Associates, Inc. and Pathology Consultants of Cleveland,
Inc. The Company issued a total of 280,525 shares of common stock at closing to
the sellers of these pathology practices.
All of the foregoing shares were exempt from registration under the Securities
Act when they were issued, pursuant to an exemption provided under Section 4(2)
of the Securities Act based upon, among other things, certain representations
made by the recipients of the stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three-month
period ended September 30, 1998.
18
<PAGE> 19
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.
AMERIPATH, INC.
Date: November 12, 1998 By: /s/ James C. New
-------------------------------------
James C. New
President and Chief Executive Officer
Date: November 12, 1998 By: /s/ Robert P. Wynn
-------------------
Robert P. Wynn
Executive Vice President and
Chief Financial Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUL-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 0 3,941
<SECURITIES> 0 0
<RECEIVABLES> 0 73,868
<ALLOWANCES> 0 41,977
<INVENTORY> 0 300
<CURRENT-ASSETS> 0 3,132
<PP&E> 0 17,642
<DEPRECIATION> 0 9,200
<TOTAL-ASSETS> 0 332,612
<CURRENT-LIABILITIES> 0 16,015
<BONDS> 0 111,647
0 0
0 0
<COMMON> 0 208
<OTHER-SE> 0 169,255
<TOTAL-LIABILITY-AND-EQUITY> 0 332,612
<SALES> 0 0
<TOTAL-REVENUES> 47,005 125,822
<CGS> 0 0
<TOTAL-COSTS> 20,677 55,889
<OTHER-EXPENSES> 10,587 27,868
<LOSS-PROVISION> 4,843 12,887
<INTEREST-EXPENSE> 2,097 5,714
<INCOME-PRETAX> 8,801 23,464
<INCOME-TAX> 3,793 10,171
<INCOME-CONTINUING> 5,008 13,293
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,008 13,293
<EPS-PRIMARY> .24 .66
<EPS-DILUTED> .23 .64
</TABLE>
