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 March 31, 2000
Commission File Number 1-8635
AMERICAN MEDICAL ALERT CORP.
(Exact Name of Registrant 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
(Registrant's telephone number, including area code)
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 __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 6,414,111 shares of $.01 par
value common stock as of May 8, 2000.
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
<TABLE>
<CAPTION>
INDEX PAGE
Part I Financial Information
<S> <C>
Report of Independent Accountants...............................................1
Condensed Consolidated Balance Sheets for March 31, 2000
and December 31, 1999...........................................................2
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 2000 and 1999......................................3
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 2000 and 1999................................4-5
Notes to Condensed Consolidated Financial Statements............................6
Management's Discussion and Analysis of
Financial Condition and Results of Operations...................................8
Part II Other Information.......................................................................11
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
American Medical Alert Corp. and Subsidiary
Oceanside, New York
We have reviewed the condensed consolidated balance sheet of American Medical
Alert Corp. and Subsidiary as of March 31, 2000 and the related condensed
consolidated statements of income and cash flows for the three-month period then
ended. These financial statements are the responsibility of the company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended (not presented herein); and in our report dated February
17, 2000 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
The accompanying condensed consolidated statements of income and cash flows of
American Medical Alert Corp. and Subsidiary for the three-month period ended
March 31, 1999 were not audited (or reviewed) by us and, accordingly, we do not
express an opinion (or any other form of assurance) on them.
May 10, 2000 /s/ Margolin, Winer & Evans LLP
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<PAGE>
ITEM 1. FINANCIAL STATEMENTS.
---------------------
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, 2000 Dec. 31, 1999*
(Unaudited)
--------------------- --------------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 230,782 $ 953,734
Accounts and notes receivable
(net of allowance for doubtful accounts of $75,000) 2,673,223 2,255,640
Inventory 865,201 791,572
Prepaid expenses and other current assets 362,983 342,548
Deferred income tax benefit 156,000 156,000
--------------------- --------------------
Total Current Assets 4,288,189 4,499,494
INVENTORY OF MEDICAL DEVICES HELD FOR LEASE - AT COST 1,075,000 988,000
FIXED ASSETS
(Net of accumulated depreciation and amortization) 6,137,371 5,503,347
OTHER ASSETS 1,085,436 393,680
--------------------- --------------------
TOTAL ASSETS $ 12,585,996 $ 11,384,521
===================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 661,383 $ 305,320
Accrued expenses 202,492 242,373
Current portion of long term debt 183,109 98,801
--------------------- --------------------
Total Current Liabilities 1,046,984 646,494
--------------------- --------------------
DEFERRED INCOME TAX LIABILITY 433,400 423,000
DEFERRED INCOME 15,966 17,166
LONG-TERM DEBT- LESS CURRENT MATURITIES 885,299 282,686
--------------------- --------------------
TOTAL LIABILITIES 2,381,649 1,369,346
--------------------- --------------------
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value - authorized, 1,000,000 shares; none issued
and outstanding. Common stock, $.01 par value, authorized - 10,000,000
shares; issued 6,458,021 shares in 2000 and 6,446,832 shares in 1999 64,581 $ 64,468
Additional paid-in capital 6,226,894 6,200,701
Retained earnings 4,018,904 3,856,038
--------------------- --------------------
10,310,379 10,121,207
Less 43,910 shares of treasury stock, at cost (106,032) (106,032)
--------------------- --------------------
Total Shareholders' Equity 10,204,347 10,015,175
--------------------- --------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,585,996 $ 11,384,521
===================== ====================
</TABLE>
See accompanying notes to condensed financial statements.
* Derived from audited financial statements.
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<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
--------------------- -------------------
Revenues:
<S> <C> <C>
Services $ 2,389,174 $ 2,114,674
Product sales 81,430 81,384
--------------------- -------------------
2,470,604 2,196,058
Costs and Expenses (Income):
Costs related to services 995,394 804,269
Costs of products sold 53,378 78,444
Selling, general and administrative expenses 1,135,571 887,263
Interest expense 14,307 5,515
Other income (8,912) (7,527)
--------------------- -------------------
Income before provisions for income taxes 280,866 428,092
Provision for income taxes 118,000 188,000
--------------------- -------------------
NET INCOME $ 162,866 $ 240,092
===================== ===================
Net income per share:
Basic $ .03 $ .04
--------------------- -------------------
Diluted $ .03 $ .04
--------------------- -------------------
Weighted average number of common shares outstanding (Note 3)
Basic 6,407,057 6,365,279
===================== ===================
Diluted 6,416,524 6,601,083
===================== ===================
</TABLE>
See accompanying notes to condensed financial statements.
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AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
--------------------- ---------------------
Cash flows From Operating Activities:
<S> <C> <C>
Net Income $ 162,866 $ 240,092
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization 414,712 305,241
Loss on unrecovered leased medical equipment 17,795 32,800
Change in Assets and Liabilities:
Decrease (Increase) in receivables (417,583) 102,440
(Increase) Decrease in inventory (73,629) (164,416)
(Increase) in prepaid expenses and other assets ( 31,663) (167,686)
Increase in accounts payable, accrued expenses and taxes
payable 325,382 144,083
--------------------- ---------------------
Net Cash Provided by Operating Activities 397,880 492,554
--------------------- ---------------------
Cash Flows Used In Investing Activities:
Net expenditures for fixed assets (1,110,938) (712,295)
Increase in notes receivable (295,621) --
Payment for account acquisitions (292,000) --
--------------------- ---------------------
Net Cash Used In Investing Activities (1,698,559) (712,295)
--------------------- ---------------------
Cash Flows From Financing activities:
Increase in notes payable - bank 600,000 --
Increase in loans payable (48,579) 23,616
Net proceeds upon exercise of stock options 26,306 62,143
--------------------- ---------------------
Net Cash Provided by Financing Activities 577,727 85,759
--------------------- ---------------------
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
Net Decrease in Cash $ (722,952) $ (142,982)
Cash, Beginning of Period 953,734 1,419,842
-------------------- --------------------
Cash, End of Period $ $
230,782 1,276,860
==================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR INTEREST $ 14,308 $ 5,515
==================== ====================
CASH PAID DURING THE PERIOD FOR INCOME TAXES $ 59,105 $ 105,855
==================== ====================
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
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, 1999
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
March 31, 2000, and the results of operations and cash flows for the three
months ended March 31, 2000 and 1999.
The accounting policies used in preparing these financial statements
are the same as those described in the December 31, 1999 financial statements.
The results of operations for the three months ended March 31, 2000 are
not necessarily indicative of the results to be expected for any other interim
period or for the full year.
3. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued 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 three
months ended March 31, 2000 and 1999 is presented in conformity with this
pronouncement.
The following table is a reconciliation of the numerators and
denominators in computing earnings per share:
<TABLE>
<CAPTION>
Income Shares Per-Share
March 31, 2000 (Numerator) (Denominator) Amounts
-------------- ------------- ------------- ------------
<S> <C> <C> <C>
Basic EPS -
Income available to
common Stockholders $ 162,866 6,407,057 $.03
====
Effect of dilutive securities -
Options and warrants - 9,467
------------- --------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Diluted EPS -
Income available to common
Stockholders and
assumed conversions $ 162,866 6,416,524 $.03
============= ============== ====
March 31,1999
-------------
Basic EPS -
Income available to
common stockholders $ 240,092 6,365,279 $.04
====
Effect of dilutive securities -
Options and warrants - 235,804
------------- --------------
Diluted EPS -
Income available to common
Stockholders and
assumed conversions $ 240,092 6,601,083 $.04
============= ============== ====
</TABLE>
4. Major Customers:
The Company is an approved Medicaid Provider in the states of New York and
Georgia and Illinois, amongst others. During the three months ended March 31,
2000 and 1999 the Company had revenue from one contract with a municipality in
New York State which represented, respectively, 36% and 46% of total revenue for
each period. The contract was effective through June 30, 1999. In January 1999,
the Company submitted its proposal to the municipality to renew and extend the
contract. Since June 30, 1999, the Company has continued to provide service to
the municipality while awaiting its selection of a provider. Even if the Company
does receive the renewal of the contract, there can be no assurance that the
same level of revenues will be sustained due to a variety of factors including
pricing, number of subscribers to be serviced, the competitive nature of the bid
process, and the amount of time that passes before renewal agreement is acted
upon by the municipality. Depending on how HCSP may award the renewal of the
agreement, pricing on an individual subscriber basis may be lower than current
levels. If the municipality does not renew the contract, a significant amount of
the Company's revenue would be lost, which would have a material adverse effect
on operating results, and in addition, there most likely would be a significant
write-down of the Company's leased medical devices (and/or a reduction in their
remaining useful lives) and medical devices held for lease. The extent of the
write down will be dependent upon the length of the transition period to the new
provider. As of March 31, 2000 and December 31, 1999 accounts receivable from
the contract represented 62% of accounts receivable and leased medical devices
in service under the contract represented 38% of leased medical devices. In
addition, a substantial amount of the Company's medical devices held for lease
at March 31, 2000 are intended primarily for this contract. At March 31, 2000
the Company has incurred legal and other fees of approximately $147,000 relating
to the contract extension. Such costs have been classified as deferred costs and
will be amortized over the new contract term or written off if the contract is
not renewed.
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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, 1999.
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
- -------------------------------
The Company has a $2,000,000 Revolving Credit Facility (the "Facility") with a
bank expiring May 31, 2001 (based upon 75% of eligible accounts receivable and
25% of inventory, as defined in the agreement with respect to the Facility).
Borrowings under the Facility bear interest at the lower of the prime rate or
the LIBOR Rate plus 2.50% and is collateralized by the Company's assets. There
is $600,000 and $800,000 outstanding under the Facility as of March 31, 2000 and
May 8, 2000, respectively. The agreement with respect to the Facility provides
for negative and affirmative covenants including those related to tangible net
worth, working capital and other borrowing. At December 31, 1999 there were no
amounts outstanding under the Facility.
The Company's working capital on March 31, 2000 was $3,241,205 as compared to
$3,853,000 on December 31, 1999. During 2000, the Company anticipates that it
will make capital investments of approximately $3,000,000 of which approximately
$1,000,000 was expended during the first quarter. Of the amount expended in the
first quarter, approximately $760,000 was used for the design, production and
purchase of additional systems which the Company intends to rent. The balance of
$240,000 has been used primarily for the enhancement of management information
systems.
During the three months ended March 31, 2000, the Company made a secured loan of
$300,000 to a provider agency to assist that agency in the expansion of its PERS
business. In addition, as part of the Company's acquisition strategy, the
Company paid $292,000 during the three months ended March 31, 2000 to purchase
and/ or convert to its systems, various local and national provider agencies.
The Company believes that its present cash and working capital position, its
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<PAGE>
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 Homecare Services Program (HCSP). During the
three months ended March 31, 2000 and 1999, the Company had revenue from this
contract , which represented 36% and 46%, respectively, of total revenues for
each period. As of March 31, 2000 and December 31, 1999, accounts receivable
from the contract represented 62% of accounts receivable. Leased medical devices
in service relating to this contract represented 38% of total leased medical
devices at March 31,2000 and December 31, 1999, Inventory relating to this
contract represented approximately 20% of total inventory on hand at March 31,
2000 and December 31, 1999. The contract with HCSP expired on June 30, 1999 and
the Company continues to service New York City's Medicaid Homecare Services
Program (HCSP) under the terms and conditions of the contract that expired.
In January 1999, the Company and several other companies submitted proposals to
provide PERS services on behalf of the City of New York through June 30, 2003.
On October 22, 1999, the Company was advised by HCSP that another company had
been preliminarily recommended. The Company's management reviewed HCSP's
preliminary recommendation and assessed 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 May 8, 2000, the contract had not
been awarded; however, the Company continues as the current vendor and current
revenues and the current subscriber base relating to this agreement have
increased slightly since the levels achieved in the 1st quarter of 1999.
If the City of New York HCSP awards the contract to another vendor,
approximately 36% of the Company's revenues would be lost, having a material
adverse effect on operating results and cash flow. In addition, it is possible
that significant adjustments to inventory and fixed assets associated with the
contract would occur. Based upon a transition method selected by HCSP, it could
be expected that revenues from HCSP would continue on a diminishing scale until
all units are removed. However, at this time, no determination can be made on
how the transition to another vendor would be accomplished and in what time
frame the transition would be made, and thus the full financial impact cannot be
assessed at this time. Even if the Company does receive the renewal of the
contract, there can be no assurance that the same level of revenues will be
sustained due to a variety of factors including pricing, number of subscribers
to be serviced, the competitive nature of the bid process, and the amount of
time that passes before the renewal agreement is acted upon by HCSP. Depending
on how HCSP may award the renewal of the agreement, pricing on an individual
subscriber basis may be lower than current levels.
In light of the possibility that the Company's contract with HCSP may not be
renewed, the Company's management has developed a business plan to minimize the
potential loss through reductions in HCSP related overhead and the re-deployment
of assets to other programs. In addition, the Company 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. In addition, the Company is
continuing to invest in new products and services.
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<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Revenue from services (recurring monthly revenues, RMR) increased $274,500 for
the three months ended March 31, 2000 as compared to the same period in 1999, an
increase of 13%. The Company continues to see strong results in the growth of
RMR resulting from refocusing its sales and marketing efforts towards the growth
of the subscriber base, rental income and service revenues. Costs related to
services as a percentage of RMR for the three months ended March 31, 2000 and
1999 were 42% and 38%, respectively. This increase in costs related to services
resulted from increased depreciation of medical devices, additional response
center personnel, and increases in telecommunication costs.
Revenue from product sales for the three months ended March 31, 2000 as compared
to the same period in 1999 remained virtually the same. Gross profit on product
sales for the three months ended March 31, 2000 and 1999 was 34% and 4%,
respectively. Gross profit increased in 2000 as a result of the sale of the
Company's new Model 450 Smart Activator and sales of the Company's products to
retirement facilities, which are at higher profit margins.
Selling, general and administrative expenses increased by $248,308 for the three
months ended March 31, 2000 as compared to the same period in 1999, an increase
of 28%. Selling, general and administrative expense as compared as a percentage
of total revenues for the three months ended March 31, 2000 and 1999 were 46%
and 40% respectively. Additional expenses incurred in 2000 were the result of
the hiring of executive and management personnel, expansion of the sales
department, and increased sales and marketing expenses.
Interest expense for the three months ended March 31, 1999 and 1998 was $14,307
and $5,515, respectively. Interest in 2000 increased as a result of additional
capital equipment leases and increases in average monthly borrowings.
The Company's income before provision for income taxes for the three months
ended March 31, 2000 was $280,866, a decrease of $ 147,226 from 1999, or 34%.
The decrease in 2000 resulted from an increase in the Company's operating and
selling and administrative costs, offset by an increase in service revenues.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. 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.
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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: May 15, 2000 By: /s/ Howard M. Siegel
-----------------------------
Howard M. Siegel
President
& Chief Operating Officer
By: /s/ Corey M. Aronin
-----------------------------
Corey M. Aronin
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 230,782
<SECURITIES> 0
<RECEIVABLES> 2,673,223
<ALLOWANCES> 75,000
<INVENTORY> 865,201
<CURRENT-ASSETS> 4,288,189
<PP&E> 6,137,371
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,585,996
<CURRENT-LIABILITIES> 1,046,984
<BONDS> 1,068,408
0
0
<COMMON> 64,581
<OTHER-SE> 10,139,766
<TOTAL-LIABILITY-AND-EQUITY> 12,585,996
<SALES> 81,430
<TOTAL-REVENUES> 2,470,604
<CGS> 53,378
<TOTAL-COSTS> 2,189,738
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,308
<INCOME-PRETAX> 280,866
<INCOME-TAX> 118,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,866
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
