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Previous: SUPER 8 ECONOMY LODGING IV LTD, SC 13E3/A, 1998-11-03 |
Next: NATIONAL PENN BANCSHARES INC, S-4/A, 1998-11-03 |
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998
Commission File Number 1-8635
AMERICAN MEDICAL ALERT CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
New York 11-2571221
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3265 Lawson Boulevard, Oceanside, New York 11572
(Address of principal executive offices)
(Zip Code)
(516) 536-5850
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
-- --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,948,419 shares of $.01 par
value common stock as of October 23, 1998.
<PAGE>
AMERICAN MEDICAL ALERT CORP.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Financial Statements <C>
Condensed Balance Sheets for September 30, 1998
and December 31, 1997 1
Condensed Statements of Income for the
Nine Months Ended September 30, 1998 and 1997 2
Condensed Statements of Income for the
Three Months Ended September 30, 1998 and 1997 3
Condensed Statements of Cash Flows for
the Nine Months Ended September 30, 1998 and 1997 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis or
Plan of Operation 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
</TABLE>
<PAGE>
Item 1. Financial Statements.
AMERICAN MEDICAL ALERT CORP.
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, 1998 Dec. 31, 1997*
------------------ ---------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 514,182 $ 304,739
Accounts and notes receivable 1,803,581 1,574,738
(net of allowance for doubtful accounts of $60,000 in '98 & $30,000 '97)
Inventory 1,270,735 1,310,551
Prepaid expenses and other current assets 211,050 196,990
Deferred income tax benefit 93,000 97,000
----------- -----------
Total Current Assets 3,892,548 3,484,018
FIXED ASSETS:
(Net of accumulated depreciation and amortization) 4,252,212 3,732,849
OTHER ASSETS 237,455 34,761
----------- ------------
TOTAL ASSETS $8,382,215 $7,251,628
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable bank $ -0- $ 150,000
Accounts payable 149,663 161,795
Accrued expenses 183,311 139,802
Taxes payable 35,192 -0-
Current portion of deferred income 4,700 -0-
Current portion of long-term debt 68,832 9,056
------------- ------------
TOTAL CURRENT LIABILITIES 441,698 460,653
------------- ------------
DEFERRED INCOME TAX LIABILITY 318,000 318,000
DEFERRED INCOME 18,066 -0-
LONG-TERM DEBT - LESS CURRENT MATURITIES 177,870 2,797
------------- ------------
TOTAL LIABILITIES 955,634 781,450
------------- ------------
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; authorized - 10,000,000 shares;
issued - 5,992,329 shares in 1998 and 5,904,607 shares in 1997 59,923 59,045
Additional paid-in capital 4,709,589 4,523,189
Retained Earnings 2,763,101 1,993,976
------------- ------------
7,532,613 6,576,210
Less 43,910 shares in 1998 & 1997 of treasury stock, at cost (106,032) (106,032)
------------- ------------
Total Shareholder's Equity 7,426,581 6,470,178
------------- ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $8,382,215 $7,251,628
============= ============
See accompanying notes to condensed financial statements.
* Derived from audited financial statements
</TABLE>
1
<PAGE>
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Revenues:
Services $ 5,758,704 $ 5,009,103
Product sales 422,770 736,836
--------------- ----------------
6,181,474 5,745,939
--------------- ----------------
Costs and Expenses (Income):
Costs related to service 2,063,540 1,911,850
Costs of products sold 354,653 675,659
Selling, general and
administrative expenses 2,375,657 2,008,717
Interest expense 14,462 35,183
Other income (7,963) (1,001)
--------------- ----------------
4,800,349 4,630,408
--------------- ----------------
Income before provision for income taxes 1,381,125 1,115,531
Provision for income taxes 612,000 490,000
--------------- ----------------
NET INCOME $ 769,125 $ 625,531
=============== ================
Net income per share
Basic $ .13 $ .11
=============== ================
Diluted $ .13 $ .11
=============== ================
Weighted average number of common shares outstanding (Note 3)
Basic 5,907,409 5,832,567
=============== =================
Diluted 6,006,736 5,938,691
=============== =================
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
AMERICAN MEDICAL ALERT CORP.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Revenues:
Services $ 2,028,487 $ 1,724,311
Product sales 107,967 444,942
-------------- --------------
2,136,454 2,169,253
-------------- --------------
Costs and Expenses (Income):
Costs related to services 696,261 678,242
Costs of products sold 103,906 405,240
Selling, general and
administrative expenses 833,419 653,138
Interest expense 4,366 11,248
Other income (4,363) (320)
------------- --------------
1,633,589 1,747,548
------------- --------------
Income before provision for income taxes 502,865 421,705
Provision for income taxes 223,000 184,300
-------------- --------------
NET INCOME $ 279,865 $ 237,405
============== ==============
Net income per share
Basic $ .05 $ .04
=============== ==============
Diluted $ .05 $ .04
=============== ==============
Weighted average number of common shares outstanding (Note 3)
Basic 5,948,419 5,858,400
=============== ==============
Diluted 6,098,342 5,979,819
=============== ==============
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
AMERICAN MEDICAL ALERT CORP.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 756,125 $ 625,531
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for bad debts 30,000 -0-
Depreciation and amortization 734,171 569,680
Issuance of stock for consulting fees -0- 3,828
Loss on unrecovered leased medical equipment 64,200 -0-
Change in Assets and Liabilities:
(Increase) in receivables (228,843) (690,729)
Decrease in inventory 39,816 2,243
(Increase) in prepaid expenses
and other assets (212,754) (94,448)
Increase (Decrease) in accounts payable,
accrued expenses and taxes payable (65,335) 125,363
------------- ----------
Net Cash Provided by Operating Activities 1,130,380 541,468
------------- ----------
Cash Flows from Investing Activities:
Net expenditures for fixed assets (1,001,564) (692,110)
Payment for account acquisitions (191,500) -0-
Net Cash (Used In) Investing Activities (1,193,064) (692,110)
---------------- ----------
Cash Flows from Financing Activities:
Repayment of bank borrowing (150,000) -0-
Increase (Decrease) in loans payable 234,849 (6,783)
Net Proceeds upon exercise of stock options 187,278 127,984
---------------- ----------
Net Cash Provided By Financing Activities 272,127 121,201
---------------- ----------
Net Increase (Decrease) in Cash $ 209,443 $ (29,441)
Cash, Beginning of Period 304,739 301,013
---------------- ----------
Cash, End of Period $ 514,182 $ 271,572
================ ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD
FOR INTEREST $ 14,462 $ 35,183
================ ===========
CASH PAID DURING THE PERIOD
FOR INCOME TAXES $ 540,809 $ 521,118
================ ===========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
AMERICAN MEDICAL ALERT CORP.
Notes to Condensed Financial Statements
(Unaudited)
1. General:
These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31,
1997 included in the Company's Annual Report on Form 10-KSB.
2. Results of Operations:
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial position as
of September 30, 1998, and the results of operations and of cash flows
for the nine months ended September 30, 1998 and 1997.
The accounting policies used in preparing these financial statements are
the same as those described in the December 31, 1997 financial
statements.
The results of operations for the nine months ended September 30, 1998
are not necessarily indicative of the results to be expected for any
other interim period or for the full year.
3. Income Per Share:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share," which changes the methodology of calculating earnings per
share. SFAS No. 128 requires the disclosure of diluted earnings per share
regardless of its difference from basic earnings per share. The Company
adopted SFAS No. 128 in December 1997. Earnings per share data for the
nine months ended September 30, 1997 have been stated to conform with
this pronouncement.
5
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. The discussion should be read in
conjunction with the consolidated financial statements contained in the latest
Annual Report dated December 31, 1997.
This discussion contains forward-looking statements which, in addition to
assuming a continuation of the degree and timing of customer utilization and
rate of renewals of contracts with the Company at relatively high levels, are
subject to a number of known and unknown risks that, in addition to general
economic, competitive and other business conditions, could cause actual results,
performance and achievements to differ materially from those described or
implied in the forward-looking statements.
Liquidity and Capital Resources
- -------------------------------
On April 27, 1998, the Company renegotiated a $2,000,000 Revolving Credit
Facility with a bank (based upon 75% of eligible accounts receivable and 25% of
inventory, as defined) expiring May 31, 2000. The note bears interest at the
lower of prime rate or LIBOR Rate plus 2.50% (as defined) and is collateralized
by the Company's assets. There are no amounts outstanding under the Credit
Facility as of October 23, 1998. The agreement provides for negative and
affirmative covenants including those related to tangible net worth, working
capital and other borrowings.
During 1998, the Company anticipates that it will make capital investments of
approximately $1,750,000 of which approximately $995,000 has been expended
through September 30, 1998 for the purchase and production of additional systems
which the Company intends to rent. In addition, approximately $145,000 has been
expended for the purchase of office and computer equipment used in operations.
The Company has also entered into a sale/leaseback agreement for certain
equipment.
The Company believes that its present cash and working capital position, its
borrowing availability and future anticipated income will be sufficient to meet
its cash and working capital needs for the foreseeable future.
Year 2000 Compliance
- --------------------
The Company is in the process of evaluating its computer systems to
determine what modifications, if any, are necessary to make such systems
compatible with Year 2000 requirements. As many of the Company's computer
systems and software have been put into service within the last few years, or
are currently being replaced with Year 2000 compliant systems and software, the
Company does not expect any such modifications to require material expenditures
or have a material adverse effect on the Company's financial position or results
of operations.
There can be no assurance, however, that the computer systems of other
companies on which the Company's systems rely will be timely modified, or that a
failure to modify such systems by another company, or modifications that are
incompatible with the Company's systems or software, would not have a material
adverse effect on the Company. The Company has had discussions with its material
vendors and suppliers with respect to the Year 2000 compliance of such entities.
Based upon such discussions, the Company believes that
6
<PAGE>
it is not likely that the Company's relationships with such entities will result
in a material adverse effect on the Company's business or results of operations
in connection with Year 2000 compliance.
Results of Operations
- ---------------------
Revenue from services increased $749,601 for the nine months ended September 30,
1998 as compared to the same period in 1997, an increase of 15%. This increase
resulted from the expansion of the Company's customer base for monthly
monitoring and rental services. Costs related to services for the nine months
ended September 30, 1998 and 1997 were 36% and 38%, respectively. Costs
decreased as a result of lower costs relative to new units.
Revenue from services increased $304,176 for the three months ended September
30, 1998 as compared to the same period in 1997, an increase of 18%. This
increase resulted from the expansion of the Company's customer base for monthly
monitoring and rental services. Costs related to services for the three months
ended September 30, 1998 and 1997 were 34% and 39%, respectively. Costs
decreased as a result of lower costs relative to new units.
Revenue from product sales decreased $314,066 for the nine months ended
September 30, 1998 as compared to the same period in 1997, a decrease of 43%.
The gross profit on product sales for the nine months ended September 30, 1998
and 1997 was 16% and 8%, respectively. Revenue from product sales decreased
$336,975 for the three months ended September 30, 1998 as compared to the same
period in 1997, a decrease of 76%. The decrease in product sales was a result of
management's changing focus toward the growth of its subscriber base and rental
income.
Interest expense for the nine months ended September 30, 1998 and 1997 was
$14,462 and $35,183, respectively. Selling, general and administrative expenses
as compared as a percentage of total revenues for the nine months ended
September 30, 1998 and 1997 were 38% and 35%, respectively.
Interest expense for the three months ended September 30, 1998 and 1997 was
$4,366 and $11,248, respectively. Selling, general and administrative expenses
as compared as a percentage of total revenues for the three months ended
September 30, 1998 and 1997 were 39% and 30%, respectively.
PART II OTHER INFORMATION
Item 3. Exhibit and Reports on Form 8-K.
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMERICAN MEDICAL ALERT CORP.
Dated: November 3, 1998 By: /s/ Howard M. Siegel
------------------------------------
Howard M. Siegel
President and Chief Operating Officer
By: /s/ Corey M. Aronin
-----------------------------------
Corey M. Aronin
Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000700721
<NAME> AMERICAN MEDICAL ALERT CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 514,182
<SECURITIES> 0
<RECEIVABLES> 1,863,581
<ALLOWANCES> 60,000
<INVENTORY> 1,270,735
<CURRENT-ASSETS> 3,892,548
<PP&E> 4,252,212
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,382,215
<CURRENT-LIABILITIES> 441,698
<BONDS> 246,702
0
0
<COMMON> 59,923
<OTHER-SE> 7,366,658
<TOTAL-LIABILITY-AND-EQUITY> 8,382,215
<SALES> 422,770
<TOTAL-REVENUES> 6,181,474
<CGS> 354,653
<TOTAL-COSTS> 4,808,312
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,462
<INCOME-PRETAX> 1,381,125
<INCOME-TAX> 612,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 769,125
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
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