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 June 30, 1999
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: 6,377,922 shares of $.01 par
value common stock as of August 9, 1999.
<PAGE>
AMERICAN MEDICAL ALERT CORP.
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements.
Condensed Balance Sheets for June 30, 1999 2
and December 31, 1998
Condensed Statements of Income for the 3
Six Months Ended June 30, 1999 and 1998
Condensed Statements of Income for the 4
Three Months Ended June 30, 1999 and 1998
Condensed Statements of Cash Flows for 5
the Six Months Ended June 30, 1999 and 1998
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders. 10
Item 6. Exhibits and Reports on Form 8-K. 10
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
--------------------
<TABLE>
<CAPTION>
AMERICAN MEDICAL ALERT CORP.
CONDENSED BALANCE SHEETS
ASSETS
June 30,1999 December 31,1998*
------------ ----------------
(Audited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 981,019 $1,419,842
Accounts and notes receivable
(net of allowance for doubtful accounts of $60,000 in '99 & '98)) 2,029,078 2,170,498
Inventory 1,869,839 1,329,526
Prepaid expenses and other current assets 349,444 139,632
Deferred income tax benefit 121,000 121,000
----------- ----------
Total Current Assets $5,350,380 $5,180,498
FIXED ASSETS:
(Net of accumulated depreciation and amortization) 5,080,128 4,541,346
OTHER ASSETS 311,219 202,352
----------- ----------
TOTAL ASSETS $10,741,727 $9,924,196
=========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 456,214 $ 185,394
Accrued expenses 152,090 142,342
Taxes payable -0- 21,569
Current portion of long-term debt 49,309 44,110
----------- -----------
Total Current Liabilities 657,613 393,415
----------- -----------
DEFERRED INCOME TAX LIABILITY 332,000 332,000
DEFERRED INCOME 19,966 22,766
LONG-TERM - LESS CURRENT MATURITIES 152,460 148,542
----------- -----------
Total Liabilities $1,162,039 $ 896,723
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; authorized - 10,000,000 shares; issued
6,421,832 shares in 1999 and 6,397,570 shares in 1998. $ 64,218 $ 63,976
Additional paid-in capital 6,150,951 6,089,050
Retained Earnings 3,470,551 2,980,479
----------- ----------
9,685,720 9,133,505
Less 43,910 shares in 1999 & 1998 of treasury stock, at cost (106,032) (106,032)
----------- ----------
Total Shareholders' Equity 9,579,688 9,027,473
----------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $10,741,727 $9,924,196
=========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
* Derived from audited financial statements
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<PAGE>
<TABLE>
<CAPTION>
AMERICAN MEDICAL ALERT CORP.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended June 30,
---------------------------
1999 1998
---- ----
<S> <C> <C>
REVENUES:
Services $4,296,790 $3,730,217
Product Sales 158,892 314,803
----------- -----------
4,455,682 4,045,020
----------- -----------
Cost and Expenses (Income):
Costs related to services 1,610,561 1,367,279
Costs of products sold 151,593 250,747
Selling, general and
administrative expenses 1,835,813 1,542,238
Interest expense 9,901 10,096
Other income (13,258) (3,600)
----------- -----------
3,594,610 3,166,760
----------- -----------
Income before provision for income taxes 861,072 878,260
Provision for income taxes 371,000 389,000
----------- -----------
NET INCOME $ 490,072 $ 489,260
---------- ----------
Net Income per share:
Basic $ .08 $ .08
---------- ----------
Diluted $ .08 $ .08
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Weighted average number of common shares outstanding (Note 3)
Basic 6,371,601 5,886,905
========== ==========
Diluted 6,510,911 5,960,934
========== ==========
</TABLE>
See accompanying notes to condensed financial statements
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<PAGE>
<TABLE>
<CAPTION>
AMERICAN MEDICAL ALERT CORP.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three months Ended June 30,
------------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues:
Services $ 2,182,117 $ 1,907,792
Product Sales 77,508 93,545
----------- ----------
2,259,625 2,001,337
Cost and Expenses (Income):
Cost related to service 806,292 705,175
Costs of products sold 73,148 89,550
Selling, general and
administrative expenses 948,549 791,025
Interest expense 4,386 3,548
Other Income (5,731) (2,974)
----------- ----------
1,826,644 1,586,324
----------- ----------
Income before provisions for income taxes 432,980 415,013
Provision for income taxes 183,000 181,000
----------- ----------
NET INCOME $ 249,980 $ 234,013
=========== ==========
Net income per share
Basic $ .04 $ .04
=========== ==========
Diluted $ .04 $ .04
=========== ==========
Weighted average number of common shares outstanding (Note 3)
Basic 6,377,922 5,902,094
=========== ==========
Diluted 6,420,739 5,990,777
=========== ==========
</TABLE>
See accompanying notes to condensed financial statements
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<TABLE>
<CAPTION>
AMERICAN MEDICAL ALERT CORP.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
---------------------------------
1999 1998
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<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 490,072 $ 489,260
Adjustments to reconcile net income to
Net cash provided by operating activities
Provision for bad debts -0- 20,000
Depreciation and amortization 582,606 477,709
Loss on unrecovered leased medical equipment 58,772 42,390
Change in Assets and Liabilities:
(Increase) Decrease in receivables 141,420 (146,896)
(Increase) Decrease in inventory (540,313) 100,764
(Increase) in prepaid expenses, deferred taxes,
and other assets (253,659) (59,336)
-
Increase (decrease) in accounts payable, accrued
expenses, taxes payable and deferred income 256,199 (126,246)
---------- ---------
Net Cash Provided by Operating Activities 735,097 797,645
---------- ---------
Cash Flows from Investing Activities:
Net expenditures for fixed assets (1,180,180) (806,288)
Payment for account acquisitions -0- 175,000
Payment for leasing agreement (65,000) -0-
---------- ---------
Net Cash (Used In) Investing Activities 1,245,180 981,288
---------- ---------
Cash Flows from Financing Activities:
Repayment of bank borrowing -0- (150,000)
Increase (Decrease) in loans payable 9,117 250,303
Net Proceeds upon exercise of stock options 62,143 126,342
Sale/leaseback of equipment -0- 128,719
---------- ---------
Net Cash Provided by Financing Activities 71,260 355,364
---------- ---------
Net (Decrease) increase in Cash $ (438,823) $ 171,721
Cash, Beginning of Period 1,419,842 304,739
Cash, End of Period $ 981,019 $ 476,460
========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD
FOR INTEREST $ 9,901 $ 10,096
========== ===========
CASH PAID DURING THE PERIOD
FOR INCOME TAXES $ 319,780 $ 344,730
========== ===========
</TABLE>
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<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, 1998 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 June 30, 1999, and the results of operations and of cash
flows for the six months ended June 30, 1999 and 1998.
The accounting policies used in preparing these financial
statements are the same as those described in the December 31, 1998
financial statements.
The results of operations for the six months ended June 30,
1999 are not necessarily indicative of the results to be expected for
any other interim period or for the full year.
3. Major Customers:
The Company is an approved Medicaid Provider in the State of
New York. During the six months ended June 30, 1999 and 1998, the
Company had revenue from one contract with the City of New York which
represented 46% and 45%, respectively, of total revenues for each
period. The contract expired on June 30, 1999. In January 1999, the
Company submitted its proposal to the City of New York to renew and
extend the contract. The Company continues to service New York City's
Medicaid Personal Care Program under the terms and conditions of the
contract that expired, while notification of the renewal is pending. As
of August 9, 1999, the contract had not been awarded. If the City of
New York does not renew the contract, a significant amount of the
Company's revenues would be lost, having a material adverse effect on
the Company's business and operating results. As of June 30, 1999 and
December 31, 1998, accounts receivable from the contract represented
66% and 67%, respectively, of the accounts receivable, and leased
medical devices in services under the contract represented 41% and 42%,
respectively, of leased medical devices during such periods.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS.
-------------
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, 1998.
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 historical 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.
RESULTS OF OPERATIONS
Revenue from services (Recurring Monthly Revenues, RMR) increased
$566,573 for the six months ended June 30, 1999 as compared to the same period
in 1998, an increase of 15%. Costs related to services for the six months ended
June 30, 1999 and 1998 were 37% in both periods. Revenue from services increased
$274,325 for the three months ended June 30, 1999 as compared to the same period
in 1998, an increase of 14%. The Company continues to see strong results in the
growth of RMR resulting from refocusing its sales and marketing efforts towards
its core business, the growth of the subscriber base, rental income and service
revenues. Costs related to services for the three months ended June 30, 1999 and
1998 were 37% in both periods.
Revenue from product sales decreased $155,911 for the six months ended
June 30, 1999 as compared to the same period in 1998, a decrease of 50%. The
gross profit on product sales for the six months ended June 30, 1999 and 1998
was 5% and 20%, respectively. Revenue from product sales decreased $16,037 for
the three months ended June 30, 1999, as compared to the same period in 1998, a
decrease of 17%. The gross profit on product sales for the three months ended
June 30, 1999 and 1998 was 6 % and 4 %, respectively.
These anticipated decreases in product sales resulted from PERS providers
continuing to subscribe to the rental option offered by the Company. Management
anticipates this trend to continue as agencies seek to provide cost
effectiveness and flexibility for subscribers. It should be noted that Medicaid
guidelines prevent the purchase of PERS equipment, further contributing to lower
product sales, thus increasing the use of rental product.
Interest expense for the six months ended June 30, 1999 and 1998 was
$9,901 and $10,096, respectively. Interest expense for the three months ended
June 30, 1999 and 1998 was $4,386 and $3,548, respectively.
Selling, general and administrative expenses as compared as a
percentage of total revenues for the six months ended June 30, 1999 and 1998
were 43 % and 41%, respectively. Selling, general and administrative expenses as
compared as a percentage of total revenues for the three months ended June 30,
1999 and 1998 were 42% and 40%, respectively. The increases in selling, general
and administrative expenses resulted from the expansion of the Company's
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<PAGE>
infrastructure and preplanned increases in sales and marketing expenditures.
Management believes that increases in SG&A expenses were necessary to increase
the Company's market visibility and provide a platform for future growth and
profitability.
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 August 9, 1999. The agreement provides for negative
and affirmative covenants including those related to tangible net worth, working
capital and other borrowings. Prior to April 27, 1998, the Company had a similar
arrangement with another bank which permitted borrowing up to $1,500,000.
During 1999, the Company anticipates that it will make capital
investments of approximately $2,000,000 of which approximately $1,200,000 has
been expended through June 30, 1999. Of the $1,200,000, $950,000 has been
expended through June 30, 1999 for the design, production and purchase of
additional systems which the Company intends to rent. In addition, approximately
$200,000 has been used primarily for the enhancement of management information
systems. In July 1999, the Company entered into a sale and leaseback transaction
for such equipment. Through June 30, 1999, inventory increased approximately
$540,000 in anticipation of meeting increased demand for the Company's recently
introduced Personal Emergency Response System (Model 800) and ancillary
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.
The Company derives a significant portion of its revenue from one
contract with the City of New York. This contract expired on June 30, 1999. The
Company continues to provide service to the City of New York's Medicaid Personal
Care Program under the terms and conditions of the expired contract as it awaits
notification of the status of its renewal. Revenues earned from this
municipality represented 46% and 45%, respectively, of total revenues for the
six months ended June 30, 1999 and 1998. Leased medical devices in service
relating to this contract represented 41% and 42%, respectively, of total leased
medical devices at June 30, 1999 and December 31, 1998. In the event the
municipality does not renew such contract, a significant amount of the Company's
revenues would be lost, which would have a material adverse effect on the
Company's business and results of operations. In the event of such non-renewal,
the Company's management will continue to build its subscriber base through
consumers, healthcare agencies, health maintenance organizations, durable
medical equipment providers, retirement communities, hospitals and other
governmental agencies.
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<PAGE>
YEAR 2000 COMPLIANCE
GENERAL
The Company is in the process of evaluating its management information
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. The Company anticipates that any
modifications required to be made to its software systems to comply with the
Year 2000 Issue will be completed in a timely manner.
THIRD PARTIES
The Company has also initiated formal communications with significant
suppliers and other key third parties to determine the extend to which the
Company is vulnerable to those third parties' failure to resolve their own Year
2000 compliance issues. There can be no assurance that the systems of other
companies on which the Company's system rely will be timely converted, or that a
failure to convert by another company, or a conversion that is incompatible with
the Company's systems, would not have a material adverse effect on the Company's
results of operations.
RISK ASSESSMENT/CONTINGENCY PLANNING
At this time, the Company believes its most reasonable likely worst
case scenario would include (i) a key material vendor or service provider
experiencing problems with delivery of materials, components or services; or
(ii) the failure of infrastructure services provided by government agencies and
other third parties (e.g., electricity, telephone, transportation, Internet
services, etc.). As noted above, the Company is evaluating the Year 2000
compliance status of its key third-party vendors to identify potential risks for
contingency planning purposes. The Company anticipates that appropriate
contingency plans will be prepared throughout 1999 as determined to be
necessary.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
On June 16, 1999, the Company held its 1999 Annual Meeting of
Shareholders (the "1999 Meeting").
At the 1999 Meeting, the Company's shareholders elected five directors
to serve until the 2000 Annual Meeting of Shareholders and until their
respective successors shall be elected and qualified. The vote for such
directors was as follows:
For Withheld
--- --------
Howard M. Siegel 5,406,096 61,687
Peter Breitstone 5,408,896 58,887
Leonard Herz 5,411,596 56,187
Theodore Simon 5,509,696 58,087
Dennis Stern 5,411,096 56,687
The Company's shareholders voted with respect to the ratification and
approval of Margolin, Winer & Evens, LLP as the Company's independent auditors
for the year ending December 31, 1999. Approximately 98% of the votes cast with
respect to the ratification and approval voted in favor of the proposal and
accordingly, the proposal was approved.
ITEM 6. EXHIBITS 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.
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<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: August 13, 1999 By: /s/ Howard M. Siegel
----------------------------------------
Howard M. Siegel
President and Chief Operating Officer
By: /s/ Corey M. Aronin
---------------------------------------
Corey M. Aronin
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000700721
<NAME> AMERICAN MEDICAL ALERT CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 981,019
<SECURITIES> 0
<RECEIVABLES> 2,089,078
<ALLOWANCES> 60,000
<INVENTORY> 1,869,839
<CURRENT-ASSETS> 5,350,380
<PP&E> 5,080,128
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,741,727
<CURRENT-LIABILITIES> 657,613
<BONDS> 152,460
0
0
<COMMON> 64,218
<OTHER-SE> 9,515,470
<TOTAL-LIABILITY-AND-EQUITY> 10,741,727
<SALES> 158,892
<TOTAL-REVENUES> 4,455,682
<CGS> 151,593
<TOTAL-COSTS> 3,594,610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,901
<INCOME-PRETAX> 861,072
<INCOME-TAX> 371,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 490,072
<EPS-BASIC> .08
<EPS-DILUTED> .08
</TABLE>
