SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 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 Identification
incorporation or organization) 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 November 12, 1999.
<PAGE>
AMERICAN MEDICAL ALERT CORP.
INDEX
PART I FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets for
September 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Income for the 4
Nine Months Ended September 30, 1999 and 1998
Condensed Consolidated Statements of Income for the 5
Three Months Ended September 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows for 6
the Nine Months Ended September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 9-12
PART II OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K. 12
<PAGE>
Item 1. Financial Statements
- -----------------------------
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<CAPTION>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 1999 December 31,1998*
(Unaudited) -----------------
------------------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 916,850 $ 1,419,842
Accounts and notes receivable
(net of allowance for doubtful accounts of $60,000 in '99 & `98)) 2,196,366 2,170,498
Inventory 2,082,631 1,329,526
Prepaid expenses and other current assets 391,115 139,632
Deferred income tax benefit 121,000 121,000
--------------- --------------
TOTAL CURRENT ASSETS $ 5,707,962 $ 5,180,498
FIXED ASSETS:
(Net of accumulated depreciation and amortization) 5,179,868 4,541,346
OTHER ASSETS 293,115 202,352
--------------- --------------
TOTAL ASSETS $ 11,180,946 $ 9,924,196
--------------- ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 302,162 $ 185,394
Accrued expenses 248,010 142,342
Taxes payable - 21,569
Current portion of long-term debt 133,517 44,110
--------------- --------------
TOTAL CURRENT LIABILITIES 683,689 93,415
--------------- --------------
Deferred Income Tax Liability 332,000 332,000
Deferred Income 19,966 22,766
Long term debt - less current maturities 372,960 148,542
--------------- --------------
TOTAL LIABILITIES $ 1,408,615 $ 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 ,663,194 2,980,479
--------------- --------------
9,878,363 9,133,505
Less 43,910 shares in 1999 & 1998 of treasury stock, at cost (106,032) (106,032)
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 9,772,331 9,027,473
--------------- --------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 11,180,946 $ 9,924,196
================ ==============
See accompanying notes to condensed financial statements.
* Derived from audited financial statements
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<TABLE>
<CAPTION>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended September 30,
-------------------------------
1999 1998
---- ----
Revenues:
<S> <C> <C>
Services $ 6,505,990 $5,758,704
Product Sales 259,284 422,770
-------- -------
6,765,273 6,181,474
--------- ---------
Cost and Expenses (Income):
Costs related to services 2,408,436 2,063,540
Costs of products sold 249,130 354,653
Selling, general and administrative expenses 2,786,343 2,375,657
Interest expense 19,283 14,462
Other expenses 115,000 -0-
Other income (7,963)
(16,636)
5,561,557 4,800,349
--------- ---------
Income before provision for income taxes 1,203,715 1,381,125
Provision for income taxes 521,000 612,000
------- -------
NET INCOME $ 682,715 $769,125
--------- --------
Net Income per share:
Basic $ .11 $ .13
------- -------
Diluted $ .11 $ .13
------- ------
Weighted average number of common shares outstanding (Note 3)
Basic 6,373,708 5,907,409
--------- ----------
Diluted 6,471,171 6,006,736
========= =========
See accompanying notes to condensed financial statements
</TABLE>
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<TABLE>
<CAPTION>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months Ended September 30,
--------------------------------
1999 1998
---- ----
Revenues:
<S> <C> <C>
Services $ 2,209,199 $ 2,028,487
Product Sales 100,392 107,967
------- -------
2,309,591 2,136,454
Cost and Expenses (Income):
Cost related to service 797,876 696,261
Costs of products sold 97,537 103,906
Selling, general and administrative expenses 950,530 833,419
Interest expense 9,382 4,366
Other expenses 115,000 -0-
Other Income (3,377) (4,363)
------- -------
1,966,948 1,633,589
--------- ---------
Income before provisions for income taxes 342,643 502,865
Provision for income taxes 150,000 223,000
------- -------
NET INCOME $ 192,643 $279,865
--------- --------
NET INCOME PER SHARE
Basic $ .03 $ .05
-------- -------
Diluted $ .03 $ .05
-------- -------
Weighted average number of common shares outstanding (Note 3)
Basic 6,377,922 5,948,419
--------- =========
Diluted 6,391,691 6,098,342
========= =========
See accompanying notes to condensed financial statements
</TABLE>
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<TABLE>
<CAPTION>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
--------------------------------
1999 1998
---- ----
Cash Flows From Operating Activities:
<S> <C> <C>
Net Income $ 682,715 $ 756,125
Adjustments to reconcile net income to
Net cash provided by operating activities
Provision for bad debts 0 30,000
Depreciation and amortization 923,790 734,171
Loss on unrecovered leased medical equipment 68,202 64,200
Change in Assets and Liabilities:
(Increase) Decrease in receivables (25,868) (228,843)
(Increase) Decrease in inventory (753,105) 39,816
(Increase) in prepaid expenses, deferred taxes,
and other assets (258,221) (212,754)
Increase (decrease) in accounts payable, accrued
expenses, taxes payable and deferred income 198,067 (65,335)
-------- --------
Net Cash Provided by Operating Activities 835,580 1,130,380
-------- ---------
Cash Flows from Investing Activities:
Net expenditures for fixed assets (1,605,540) (1,001,564)
Payment for account acquisitions -0- (191,500)
Payment for licensing agreement (65,000) -0-
Net Cash (Used In) Investing Activities (1,670,540) ( 1,193,064)
----------- ------------
Cash Flows from Financing Activities:
Repayment of bank borrowing -0- (150,000)
Increase (Decrease) in loans payable 19,825 234,849
Net Proceeds upon exercise of stock options 62,143 187,278
Sale/leaseback of equipment 250,000 -0-
Net Cash Provided by Financing Activities 331,968 272,127
------- -------
Net (Decrease) increase in Cash $ (502,992) $ 209,443
Cash, Beginning of Period 1,419,842 304,739
--------- -------
Cash, End of Period $ 916,850 $ 514,182
----------- =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD
FOR INTEREST $ 19,283 $ 14,462
-------- ========
CASH PAID DURING THE PERIOD
FOR INCOME TAXES $ 631,268 $ 540,809
--------- =========
</TABLE>
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AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
Notes to Condensed Consolidated 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.
In July 1999, Safe Com, Inc. was incorporated as a wholly owned
subsidiary. Safe Com is developing state of the art passive
security/interactive voice technologies.
2. Results of Operations:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting
only of normal recurring accruals) necessary to present fairly the
financial position of the Company as of September 30, 1999, and the
results of operations and of cash flows for the nine months ended
September 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 nine months ended September 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 nine months ended September 30, 1999 and 1998, the Company
had revenue from one contract with the City of New York which
represented, respectively, 41% and 43%, respectively, of total revenues
for each period. The contract with HCSP expired on June 30, 1999 and
the Company continues to service New York City's Medicaid Home Care
Services Program (HCSP) under the terms and conditions of the expired
contract. In January 1999, the Company submitted its proposal to the
City of New York to renew and extend the contract. On October 22, 1999,
the Company was advised by HCSP that another company had been
preliminarily recommended. The Company is reviewing HCSP's preliminary
recommendation and is assessing alternative options and courses of
action. On November 1, 1999, the Company submitted a formal protest
pursuant to paragraph 4-04 of the Rules of the Procurement Policy Board
of the City of New York to contest the preliminary award. As of
November 12, 1999, the contract had not been awarded.
-7-
<PAGE>
If the City of New York HCSP awards the contract to another vendor, a
significant amount of the Company's revenues would be lost, having a
material adverse effect on operating results. In addition, it is
possible that significant future adjustments to inventory and fixed
assets associated with the contract could occur. However, the Company
cannot assess the full financial impact at this time, as no
determination can be made on the duration and manner of the transition
to another vendor.
As of September 30, 1999 and December 31, 1998, accounts receivable
from the New York City contract represented 61% and 66%, respectively,
of the accounts receivable and leased medical devices in service under
the contract represented 40% and 42%, respectively, of leased medical
devices. Inventory relating to this contract represented approximately
25% of total inventory on hand as of September 30, 1999 and December
31, 1998.
-8-
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
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.
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 November 12, 1999. The agreement provides for negative and
affirmative covenants including those related to tangible net worth, working
capital and other borrowing. Prior to April 27, 1998, the Company had a similar
arrangement with another bank which permitted borrowing up to $2,000,000.
During 1999, the Company anticipates that it will make capital investments of
approximately $2,200,000 of which approximately $1,600,000 has been expended
through September 30, 1999. Of the $1,600,000, $1,300,000 has been expended
through September, 1999 for the design, production and purchase of additional
systems which the Company intends to rent. In addition, approximately $300,000
has been used primarily for the enhancement of management information systems.
In October 1999, the Company entered into a sale and leaseback transaction for
such 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's Medicaid Home Care Services Program (HCSP). During the
nine months ended September 30, 1999 and 1998, the Company had revenue from this
contract which represented 41% and 43%, respectively, of total revenues for each
period. Leased medical devices in service relating to this
-9-
<PAGE>
contract represented 40% and 42%, respectively, of total leased medical devices
at September 30, 1999 and December 31, 1998. Inventory relating to this contract
represented approximately 25% of total inventory on hand at September 30, 1999
and December 31, 1998. The contract with HCSP expired on June 30, 1999 and the
Company continues to service New York City's Medicaid Home Care Services Program
(HCSP) under the terms and conditions of the contract that expired. In January
1999, the Company submitted its proposal to the City of New York to renew and
extend the contract.
On October 22, 1999, the Company was advised by HCSP that another company had
been preliminarily recommended. The Company is reviewing HCSP's preliminary
recommendation and is assessing alternative options and courses of action. On
November 1, 1999, the Company submitted a formal protest pursuant to paragraph
4-04 of the Rules of the Procurement Policy Board of the City of New York to
contest the preliminary award. As of November 12, 1999, the contract had not
been awarded.
If the City of New York HCSP awards the contract to another vendor, a
significant amount of the Company's revenues would be lost, having a material
adverse effect on operating results. In addition, it is possible that
significant future adjustments to inventory and fixed assets associated with the
contract could occur. However, the Company cannot assess the full financial
impact at this time, as no determination can be made as to the duration and
manner of the transition to another vendor.
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.
Year 2000 Compliance
- --------------------
General
The Company has evaluated 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 extent 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
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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 continues to prepare appropriate
contingency plans as will be determined to be necessary.
Results of Operations
- ---------------------
Revenue from services (Recurring Monthly Revenues, or "RMR") increased $747,286
for the nine months ended September 30, 1999 as compared to the same period in
1998, an increase of 13%. Costs related to service revenues for the nine months
ended September 30, 1999 and 1998 were 37% and 36% respectively. Revenue from
services increased $ 180,712 for the three months ended September 30, 1999 as
compared to the same period in 1998, an increase of 9 %. Costs related to
service revenues for the three months ended September 30, 1999 and 1998 were 36%
and 34% respectively. The increases in revenue and the growth of RMR resulted
from the Company refocusing its sales and marketing efforts towards the growth
of the subscriber base, rental income and service revenues; however increses in
revenue were offset by increases in personnel and related costs in the Company's
Emergency Response Center, as well as costs related to the Increases in costs
related to service revenues resulted from amortization of leased equipment. The
Company believes that future increases in RMR should be accretive to operating
margins.
Revenue from product sales decreased $163,486 for the nine months ended
September 30, 1999 as compared to the same period in 1998, a decrease of 39 %.
The gross profit on product sales for the nine months ended September 30, 1999
and 1998 was 4% and 16 % respectively. Product sales accounted for 4% and 7% of
total revenues for the nine months ended September 30, 1999 and 1998
respectively. Revenue from product sales decreased $7,575 for the three months
ended September 30, 1999 as compared to the same period in 1998, a decrease of 7
%. The gross profit on product sales for the three months ended September 30,
1999 and 1998 was 4% in both periods. Product sales accounted for 4% and 5% of
total revenues for the three months ended September 30, 1999 and 1998
respectively. Management anticipates that product sales should improve somewhat
through sales generated by its recently introduced Model 450 Smart Activator, an
advanced remote signalling devise featuring built in battery monitoring that
reduces the costs associated with program maintenance.
Interest expense for the nine months ended September 30, 1999 and 1998 was $
19,283 and $ 14,462 respectively. Interest expense for the three months ended
September 30, 1999 and 1998 was $ 9,382 and $ 4,366 respectively. Increases in
interest expense for the nine and three months ended September 30, 1999 and 1998
resulted from additional capital leases.
Selling, general and administrative expenses as compared as a percentage of
total revenues for the nine months ended September 30, 1999 and 1998 were 41%
and 38% respectively. Selling, general and administrative expenses as compared
as a percentage of total revenues for the three months ended September 30, 1999
and 1998 were 41% and 39% respectively. The increases in
-11-
<PAGE>
selling, general and administrative expenses resulted from the expansion of the
Company's 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.
Other expenses incurred during the three months and nine months ended September
30, 1999 include $ 115,000 of developmental and start up costs associated with
the Company's subsidiary, Safe Com, Inc., which is developing state of the art
passive security/interactive technologies.
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.
-12-
<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 there
unto duly authorized.
AMERICAN MEDICAL ALERT CORP.
Dated: November 12, 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
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000700721
<NAME> AMERICAN MEDICAL ALERT CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Sep-30-1999
<CASH> 916,850
<SECURITIES> 0
<RECEIVABLES> 2,256,366
<ALLOWANCES> 60,000
<INVENTORY> 2,082,631
<CURRENT-ASSETS> 5,707,963
<PP&E> 5,179,868
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,180,946
<CURRENT-LIABILITIES> 683,689
<BONDS> 372,960
0
0
<COMMON> 64,218
<OTHER-SE> 9,708,113
<TOTAL-LIABILITY-AND-EQUITY> 11,180,946
<SALES> 259,284
<TOTAL-REVENUES> 6,765,273
<CGS> 249,130
<TOTAL-COSTS> 5,561,557
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,283
<INCOME-PRETAX> 1,203,715
<INCOME-TAX> 521,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 682,715
<EPS-BASIC> .11
<EPS-DILUTED> .11
</TABLE>
