U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended September 30, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to ________
SURGICARE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 58-1597246
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6699 CHIMNEY ROCK, SUITE 105
HOUSTON, TEXAS 77081
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (713) 665-1406
Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
As of November 30, 2000, 12,596,657 shares of Common Stock, $0.005 par value per
share, were outstanding.
As of November 30, 2000, 1,450,000 shares of
Series A Redeemable Preferred Stock,$.001 par value per share,were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
The information contained herein contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby. Investors are
cautioned that all forward looking statements involve risks and uncertainty,
including, without limitation, the ability of SurgiCare to continue its
expansion strategy, changes in federal or state healthcare laws and regulations
or third party payer practices, SurgiCare's historical and current compliance
with existing or future healthcare laws and regulations and third party payer
requirements, changes in costs of supplies, labor and employee benefits, as well
as general market conditions, competition and pricing. Although SurgiCare
believes that the assumptions underlying the forward looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward looking statements
included in this Form 10-QSB will prove to be accurate. In view of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by SurgiCare or any other person that the objectives and plans of
SurgiCare will be achieved. SurgiCare undertakes no obligation to update or
revise forward-looking statements to reflect changed assumptions, the occurrence
of unanticipated events or changes to future operating results over time.
ITEM 1.
Financial Statements
The information required hereunder is included in this report as set forth
in the "Index to Financial Statements"
INDEX TO FINANCIAL STATEMENTS
Page
Consolidated Balance Sheet as of December 31 1999, and
September 30, 2000 3
Consolidated Income Statement for the 3 months ending as
of September 30, 1999 and 2000 and the 9 months ending as of
September 30, 1999 and 2000. 5
Consolidated Statement of Cash Flows for the 3 months ending as
of September 30, 1999 and 2000 and the 9 months ending as of
September 30, 1999 and 2000. 6
<PAGE>
<TABLE>
SURGICARE, INC.
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
<S> <C> <C>
1999 2000
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 243,859 $ 123,289
Accounts receivable (less allowance for
contractual adjustments and doubtful accounts 1,832,833 2,562,258
of $1,470,530 and $2,008,981 at December
31, 1999 and September 30, 2000, respectively)
Inventory 89,361 152,442
Prepaid expenses 27,175 28,560
Other current Assets 21,200 37,740
Total Current Assets 2,214,428 2,904,289
Property and Equipment
Office furniture and equipment 40,922 44,228
Medical and surgical equipment 660,225 728,949
Leasehold improvements 28,016 398,019
Computer equipment 58,303 65,709
Autos 30,142
Construction in Progress 117,121
Less: Accumulated depreciation and (487,998) (601,451)
amortization
Total Property and Equipment 416,589 665,595
Other Assets
Goodwill 166,367 157,762
Acquisitions in Progress 11,119
TOTAL ASSETS $ 2,797,384 $ 3,7387655
SURGICARE, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES
Current Liabilities
Current portion of capital lease $ 21,464 $ 22,971
Notes Payable 633,764 506,841
Accounts Payable 147,685 280,710
Accrued Expenses 128,280 52,320
Federal income tax payable 95,637 657,517
Deferred federal income tax 546,000 678,899
Total Current Liabilities 1,572,830 2,199,258
Long-Term Capital Lease Obligations 49,544 24,334
Total Liabilities 1,622,374 2,223,592
SHAREHOLDERS' EQUITY
Preferred Stock, Series A, par value
$.001, 1,650,000 authorized, 1,400,000 and 1,400 1,450
1,450,000 issued and outstanding at
December 31, 1999 and September 30, 2000 respectively
September 20, 2000 redemption & liquidation value
Is $7,250,000
Common Stock, par value $.005, 50,000,000 shares
authorized, 12,596,657 issued and outstanding 62,983 62,983
Additional Paid-In Capital 900,245 922,696
Retained Earnings 237,882 786,224
Less: Shareholders receivables (27,500) (258,180)
Total Shareholders' Equity 1,175,010 1,515,172
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,797,384 $3,738,765
</TABLE>
<TABLE>
SURGICARE, INC.
<CAPTION>
CONSOLIDATED INCOME STATEMENT
(unaudited)
FOR THE FOR THE
THREE MONTHS ENDING NINE MONTHS ENDING
September 30, September 30
<S> <C> <C> <C> <C>
1999 2000 1999 2000
Revenues, net $ 1,199,163 $ 1,257,294 $ 3,172,933 $ 3,856,747
Expenses
Direct Surgical Expenses
Surgical Costs 194,376 257,484 444,907 692,815
Salaries, wages and Benefits 98,662 134,047 285,136 348,212
Contract services 47,929 46,622 117,876 143,344
Total Direct Surgical Expenses 340,967 438,153 847,918 1,184,370
Gen. and Admin. Expenses
Salaries, Wages and Benefits 48,186 88,982 86,431 207,177
Management company termination fee 164,333 0 164,333 0
Professional fees 11,554 32,420 19,018 96,178
Rent 45,883 44,682 132,454 130,047
Management Fee 58,416 23,299 190,384 61,311
Insurance 8,155 9,760 21,991 27,521
Depreciation 34,352 37,129 90,961 122,059
Repairs and maintenance 2,206 19,159 11,635 49,604
Other operating expenses (27,302) 79,551 99,639 179,846
Taxes 11,692 13,535 19,479 23,587
Total Direct Gen. and Admin. Expenses 357,474 348,517 836,325 897,329
Total Expenses 698,441 786,670 1,684,243 2,081,700
Other Income
Gain on sale of property and equipment 0 0 12,025 0
Miscellaneous income 1,893 0 6,550 0
Total Other Income 1,893 0 18,575 0
Earnings Before Income Tax Expense 502,615 470,624 1,507,265 1,775,047
Federal Income Tax Expense (Benefit)
Deferred 139,865 (74,032) 568,516 132,899
Current 18,319 265,161 18,319 497,456
State 2,107 14,721 2,107 74,350
Net Earnings $ 342,324 $ 264,774 $ 918,323 $ 1,070,342
Pro forma income data (unaudited):
Earnings before federal income tax expense $ 342.324 $ 264,774 $ 1,507,265 $ 1,070,342
Proforma federal and state income tax (584,905)
Dividends Paid (162,000) (174,000) (776,000) (522,000)
Pro forma Net Earnings $ 180,.324 $ 90,774 $ 146,360 $ 548,342
Pro forma earnings per share - basic and $ $ 001 $ 0.01 $ 0.05
diluted 0.02
</TABLE>
<TABLE>
<CAPTION>
SURGICARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE FOR THE
THREE MONTHS ENDING NINE MONTHS ENDING
September 30, September 30
<S> <C> <C> <C> <C>
1999 2000 1999 2000
Cash Flows From Operating Activities
Net earnings $ 342,324 $ 264,774 $ 918,323 $ 1,070,342
Adjustments to reconcile net earnings to
net cash provided by operations:
Depreciation and amortization 34,352 37,129 90,964 122,058
Gain on sale of property and 0 0 24,450 0
equipment
Deferred federal income tax 139,516 (74,032) 568,516 132,899
Management company termination fee 164,333 0 164,333 0
(Increase) Decrease in:
Accounts receivable (322,745) (65,606) (771,749) (729,425)
Inventory 0 (2,013) (63,081)
(12,579)
Prepaid expenses (1,089) (5,382) (1,349) (1,385)
Other current assets 495 (39,925) (2,290) (27,659)
Increase (Decrease) in:
State income tax payable 0 6,887 0 64,425
Federal income tax receivable 45,576 265,161 45,576 497,456
Accounts payable (5,975) (31,535) 77,119 133,025
Accrued expenses (17,601) (23,545) (32,212) (75,960)
Net Cash Provided by Operating 379,186 321,347 1,079,668 1,122,696
Activities
Cash Flows From Investing Activities
Capital expenditures (44,458) (47,974) (73,356) (362,460)
Proceeds from sale of property and 0 0 (12,025) 0
equipment
Loan to Shareholders 0 (1,730) 0 (268,730)
Acquisition of SurgiCare, Inc. (172,105) 0 (172,105) 0
Net Cash Used in Investing Activities (216,563) (49,704) (257,486) (631,190)
Cash Flows From Financing Activities
Proceeds from Notes Payable 161,000 0 161,000 50,000
Payments on debt (61,553) (40,264) (168,632) (176,923)
Principal payments on capital lease (8,496) (12,552) (13,604) (23,703)
Collections on shareholder receivable 8,271 6,300 80,772 38,050
Proceeds from Sale of Preferred Stock 27,000 0 27,000 22,500
Dividends paid to preferred shareholders (162,000) (178,000) (162,000) (522,000)
Distributions to shareholders 0 0 (599,000) 0
Net Cash Used in Financing Activities (35,778) (224,516) (674,464) (612,076)
Net Decrease in Cash and Cash Equivalents 126,845 47,127 147,718 (120,570)
Cash and Cash Equivalents - Beginning of 77,923 76,162 57,049 243,859
Period
Cash and Cash Equivalents - End of Period $ 204,768 $ 123,289 204,768 123,289
</TABLE>
SURGICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying financial statements are unaudited, but in the opinion of
management, include all adjustments necessary for a fair presentation of
financial position and results of operations for the periods presented.
Note 1 - Accounting Policies
SurgiCare, Inc. (the Company) maintains its accounts on the accrual method of
accounting in accordance with generally accepted accounting principles.
Accounting principles followed by the Company and the methods of applying those
principles which materially affect the determination of financial position,
results of operations and cash flows are summarized below:
Description of Business
Bellaire SurgiCare, Inc. (Bellaire) was formed in January, 1995 as a Texas
corporation to operate a day surgery center in Houston, Texas, and
therefore operates as a single segment. Effective July 1, 1999, Bellaire
acquired SurgiCare, Inc. (formerly Technical Coatings, Inc.) in a reverse
acquisition. Bellaire SurgiCare, Inc. is now a wholly owned subsidiary of
SurgiCare, Inc.
Principles of Consolidation
These consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Bellaire SurgiCare, Inc. All material
inter company balances and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents. During the year, the
Company maintained cash balances in excess of federally insured limits.
Revenue Recognition
Revenue is recognized on the date the procedures are performed, and
accounts receivable are recorded at that time. Revenues are reported at the
estimated realizable amounts from patients and third-party payers. If such
third-party payers were to change their reimbursement policies, the effect
on revenue could be significant. Earnings are charged with a provision for
contractual adjustments and doubtful accounts based on fee schedules,
contracts and collection experience. Contractual adjustments and accounts
deemed uncollectible are applied against the allowance account.
Inventory
Inventory consists of medical and pharmaceutical supplies which are stated
at the lower of cost or market. Cost is determined under the first in,
first-out method.
Property and Equipment
Property and equipment are presented at cost. Medical and surgical
equipment, of approximately $144,000, under capital lease is recorded at
the present value of future minimum lease payments. Depreciation and
amortization are computed at rates considered sufficient to amortize the
cost of the assets, using the straight-line method over their estimated
useful lives as follows:
Office furniture and equipment 7 years
Medical and surgical equipment 5 years
Leasehold improvements 5 years
Computer equipment 5 years
Goodwill
Goodwill arises from the acquisition of assets at an amount in excess of
their fair market value. Amortization is computed by the straight-line method
over 15 years.
SURGICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 1999 and 2000
Federal Income Taxes
Prior to July 1, 1999, the Company had elected to be taxed as an S
corporation under provisions of the Internal Revenue Code. As such, current
taxable income had been included on the income tax returns of the
shareholders for federal income tax purposes and no provision had been made
for federal income taxes.
Effective July 1, 1999, the Company changed its election to be taxed as a C
corporation under the Internal Revenue Code. Taxes on income are provided
based upon Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," which requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable
or deductible amounts in the future. Such deferred income tax asset and
liability computations are based on enacted tax laws and rates applicable to
periods in which the differences are expected to affect taxable income.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 - Unaudited Pro Forma Net Earnings and Pro Forma Earnings Per Share
Pro forma earnings per share represent pro forma net earnings (after a
pro forma provision for income taxes as if the Company had been subject to
federal and state income taxation as a C corporation since inception) available
to common shareholders divided by the pro forma weighted average number of
common shares outstanding during the period. Pro forma weighted average shares
were calculated giving effect to the 7,304 to 1 exchange of SurgiCare common
stock for Bellaire common stock, as if the reverse acquisition had occurred at
the beginning of each period presented. The conversion of preferred stock to
common stock is anti-dilutive
Note 3- Subsequent Events
On October 20 2000, and effective October 21, 2000, SurgiCare, Inc.
("SurgiCare") purchased from Memorial Village Surgery Center, L.P. ("MVSC"), a
Texas Limited Partnership an undivided 60% interest in the assets and assumed
liabilities of a surgery center in Houston, Texas.
Pursuant to the terms of the Asset Purchase Agreement, dated October 20,
2000, by and among SurgiCare, MVSC, and other entities, SurgiCare paid to MVSC a
total purchase price equal to $8,210,000, $4,490,000 in cash, and $3,720,000 in
SurgiCare common stock, par value $.005 per share.
The cash used in the purchase transaction was obtained from borrowings
under three affiliated loan agreements, two of which are between SurgiCare,
Bellaire SurgiCare, Inc. ("Bellaire") a SurgiCare wholly owned subsidiary, and
DVI Financial Services, Inc. and one between SurgiCare, Bellaire and DVI
Business Credit, Inc.
The consideration paid to MVSC was determined through arm's-length negotiations
between SurgiCare, MVSC and other related entities.
Following the asset purchase, SurgiCare and the owners of the remaining 40%
of the assets and assumed liabilities comprising the surgery center contributed
their respective ownership interests in the assets and assumed liabilities of
the surgery center into a newly formed Texas Limited Partnership, SurgiCare,
Memorial Village, L.P., and received proportionate partnership interests
therein.
In an unrelated transaction, SurgiCare acquired an undivided 10% general
partnership interest in San Jacinto Surgery Center, L.P., as well as the centers
management contract. SurgiCare paid $320,000 cash to the partnership for both
the General Partnership interest and the management contract.
The cash used in the purchase was funded in part from operations in
addition to a $250,000 loan obtained from Southwest Bank of Texas.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
(Unaudited) (Unaudited)
-------------- ------------
<S> <C> <C> <C> <C>
1999 2000 1999 2000
Basic Earnings Per Share:
Pro forma net earnings $ 342,323 $ 264,774 $ 918,146 $1,070,342
Less: Preferred dividends 174,000 162,000 822,000
----------- -------- --------- ---------
Pro forma net earnings available for common
Shareholders. $ 342,323 $ 90,774 $ 756,146 $ 548,342
============= =========== =========== ==========
Weighted average shares outstanding 11,214,560 12,596,657 11,536,272 12,596,657
============= =========== =========== ==========
Pro forma net earnings per share - basic $.02 $.01 $.03 $.05
Proforma earnings per share for 1999 have been reduced to assume the
Preferred stock had been issued at the beginning of the period.
</TABLE>
Note 4 - Preferred Stock
The Series A preferred stock is convertible at a rate of one share of
preferred stock into one share of $.005 par value common stock. The Company can
redeem the stock at $5 per share. The Series A preferred stock accrues dividends
at a rate of $.48 per share per annum which are payable, in arrears, on the
first day of the month. Holders of Series A preferred stock are entitled to one
vote for each share of Series A preferred stock held.
ITEM 2.
Management's Discussion and Analysis of Financial Condition and results of
Operation.
SurgiCare principal business strategies are to (i) increase physician
utilization of existing facilities, (ii) increase both the revenue and profits,
from current cases and procedures being performed in existing facilities and,
(iii) achieve growth and expand revenues by pursuing strategic acquisitions of
existing, and the development of new, physician owned ambulatory surgical
centers.
(i) SurgiCare has completed its addition of one new operating room to its
Bellaire facility. This additional operating room has increased the capacity at
Bellaire by 50%.
(ii) SurgiCare is constantly striving to achieve increase profits from
existing revenues. Surgical supply costs are the single largest cost component
of any ambulatory surgical center. Therefore SurgiCare is always looking for
ways to decrease the cost of surgical supplies. Through participation in
national buying groups SurgiCare has been able to negotiate discounts on most of
the commonly used surgical supplies. SurgiCare has also implemented a "Just in
Time" approach to inventory. This allows the center to minimize the amount of
supplies that it is required to keep in inventory. SurgiCare is also always
looking for new distributors of its surgical supplies that have the capability
to deliver the majority of its surgical supplies "Just in Time", and provide
quality service, at reduced prices. SurgiCare has found that the purchasing
policies that govern the acquisition of surgical equipment is an important key
to maximize a centers profit. Therefore all equipment is purchased at the
corporate level, in order to insures that the equipment is purchased at the
lowest possible price.
(iii) SurgiCare is in the process of identifying ambulatory surgical
centers as potential acquisition targets, and has, in some cases, conducted
preliminary discussions with representatives of centers. At the time of this
filing there are no commitments, understandings, or agreements with any
potential acquisition targets. Except as stated below, such discussions have
been tentative in nature and there can be no assurance that SurgiCare will
acquire any center with whom discussions have been conducted. SurgiCare expects
that generally the acquisition of another surgery center would take the form of
a merger, stock-for-stock exchange or stock-for-assets exchange, and that in
most instances the target company will wish to structure the business
combination to be within the definition of a tax-free reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended. SurgiCare may,
however, use other acquisition structuring techniques, including purchases of
assets or stock for cash or cash and stock, or through formation of one or more
limited partnerships or limited liability companies.
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following table sets forth for the periods indicated the percentages of
revenues represented by income statement items.
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30
<S> <C> <C>
1999 2000
------------------------------------------------------------------------
Revenues, net 100.00% 100.00%
------------------------------------------------------------------------
Expenses
Direct Costs of Sales
------------------------------------------------------------------------
Surgical Costs 14.02% 17.96%
------------------------------------------------------------------------
Clinical Salaries, Wages and benefits 8.99% 9.03%
------------------------------------------------------------------------
Other Surgical Cost 3.72% 3.72%
------------------------------------------------------------------------
Total Direct Cost of Services 26.72% 30.71%
------------------------------------------------------------------------
General & Administrative Expenses
------------------------------------------------------------------------
Salaries, Wages and benefits 2.72% 5.37%
------------------------------------------------------------------------
Management Co. Termination Fee 5.18% 0.00%
-----------------------------------------------------------------------
Professional Fees 0.60% 2.49%
------------------------------------------------------------------------
Rent 4.17% 3.37%
------------------------------------------------------------------------
Management Fee 6.0% 1.59%
------------------------------------------------------------------------
Insurance 0.69% 0.71%
------------------------------------------------------------------------
Depreciation 2.87% 3.16%
------------------------------------------------------------------------
Repairs & Maintenance 0.37% 1.29%
------------------------------------------------------------------------
Other operating expenses 3.14% 0.61%
------------------------------------------------------------------------
Taxes 0.61% 0.40%
------------------------------------------------------------------------
Total G & A 26.36% 23.27%
------------------------------------------------------------------------
Total Expenses 53.08% 53.98%
------------------------------------------------------------------------
Operating Income 46.92% 46.02%
------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------
Gain on sale of property and equipment 0.38% 0.00%
------------------------------------------------------------------------
Miscellaneous income 0.21% 0.00%
------------------------------------------------------------------------
Total Other Income 0.59% 0.00%
------------------------------------------------------------------------
Earnings Before Federal Income Tax Expense 47.5% 46.02%
------------------------------------------------------------------------
Federal Income Tax Expense (Benefit)
------------------------------------------------------------------------
Current 0.58% 12.90
------------------------------------------------------------------------
Deferred 17.92% 3.45%
------------------------------------------------------------------------
State .07% 1.93%
------------------------------------------------------------------------
Net Earnings 28.94% 27.75%
------------------------------------------------------------------------
</TABLE>
RESULTS OF OPERATION
The following table sets forth for the period indicated the number of surgical
cases.
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30 September 30
<S> <C> <C> <C> <C>
1999 2000 1999 2000
Total Number of Cases 718 714 1918 2,245
Total Revenue Generated $1,199,163 $1,257,294 $3,172,933 $3,856,747
Revenue Generated per Case $ 1,670 $ 1,760 $ 1,654 $ 1,717
Earnings Before Income Tax per Case* $ 697 $ 598 $ 784 $ 771
</TABLE>
* The use of specialty pain management implants in increased numbers for
the quarter ending September 30, 2000 has created the appearance of lower
earnings per procedure. Third party payers have a fixed reimbursement for
implants at our cost plus ten percent. Earnings per case appear to drop because
of this low profit cap and the high cost of these implants. Implants accounted
for 25% of the total procedure costs in the three months ending September 30,
2000, and 14% for the nine-month period ending September 30, 2000.
Bellaire SurgiCare continues to deliver cost effective healthcare. Earnings
per procedure actually increased 3% for the three months ending September 30,
2000 when the revenue and profit associated with these implants are
extrapolated.
Management does not consider the use of implants or the associated
reduction in earnings per case significant in view of the fact that revenue,
earnings and case volume each increased in the nine-month period ending
September 30, 2000.
THREE MONTHS ENDING September 30, 2000 vs. THREE MONTHS ENDING September 30,1999
In the three months ending September 30, 2000 Bellaire recorded revenues of
$1,257,294, compared to $ $1,199,163 for the same period in 1999, which
represents a 4.8% increase in revenue for the quarter.
SurgiCare performed 714 cases by September 30, 2000 compared to 718
procedures for the same period in 1999. This represents a negligible decrease of
less than 1% in average monthly utilization. Revenue for the period ending
September 30, 2000 increased 5% to $1760 from $1670 for the same period in 1999.
The pre-tax earnings generated per case decreased from $697 per case for
the three-month period ending September 30, 1999, to $659 for the same period in
2000, which represents a 5% decrease. This drop is attributed to the increased
surgical expenses caused by the high cost of implant. The utilization of implant
for the period increased, due to contractual obligations with third party
payers, earnings per procedure utilizing implants are reimbursed at a fixed rate
which is lower than normal direct surgical costs, thereby reducing per case
earnings.
General and administrative expenses decreased slightly as a percentage of
total revenue from 29.81% for the period ending September 30, 1999, to 27.27%
for the same period in 2000. Management expects that these costs will increase
slightly as the company continues to aggressively pursue its merger and
acquisition strategy.
As a percentage of revenue, total expenses rose slightly from 58.24% for
the period ending September 30, 1999, to 62.56% for the same period in 2000. The
cause of this increase was higher advertising, accounting and legal costs.
Management anticipated this small increase as it continues to aggressively
advertise for, pursue, and finalize mergers with suitable partners.
For the quarter, utilization of the center remained steady. However,
expenses associated with the pending mergers, as well as the limited
reimbursement on implant procedures, resulted in pre-tax earnings of 37.43% of
revenues for the period ending September 30, 2000 vs. 41.91% for the
three-period ending September 30, 1999.
NINE MONTHS ENDING September 30, 2000 vs. NINE MONTHS ENDING September 30, 1999
In the nine months ending September 30, 2000 Bellaire posted record revenue
of $3,856,747 compared to $3,172,933 for the same period in 1999 which
represents a 21% increase in total revenue. Pre-tax earnings also increased. For
the period ending September 30, 2000, the earnings before income tax were
$1,775,047 as compared to $1,507,265 for the same period the year prior.
SurgiCare performed a higher number of cases for the nine months ending
September 30, 2000, as well. A total of 2245 cases were performed compared to
1918 procedures for the same period in 1999. This represents an increase of 17%
in average utilization. Revenues generated per case increased 3.8% for the nine
months ending September 30, 2000 to $1,717 compared to $1,654 for the same
period last year.
The pre-tax earnings generated per case decreased slightly from $786 per
case for the nine-month period ending September 30, 1999, to $791 for the same
nine-month period in 2000. This decrease is in part because of the increase in
procedures involving implants. As stated earlier, third party payer restrictions
on reimbursements for these items reduce per case earnings.
Earnings before federal income tax expense rose in the period ending
September 30, 2000 to $1,775,047 from the same period last year, an increase of
17.77%.
Net earnings increased slightly to $1,070,342 from $918,323 for the period
ending September 30, 2000, as compared to the same period last year.
Since its formation, the Company has financed its operating activities
primarily through cash generated from operations. Net cash provided by operating
activities increased from $1.08 million for the nine-month period end September
30, 1999 to $1.12 million for the same period in 2000, due primarily to the
level of net income and changes in operating assets and liabilities. The Company
had $705 thousand of working capital as of September 30, 2000 compared to $642
thousand of working capital as of September 30, 1999.
Capital expenditures increased from $73 thousand for the nine-month period
ending September 30, 1999 to $362 thousand for the same period in 2000. The
increase was due in part to the additional equipment required to increase case
capacity within specific surgical services, as well as the expenses associated
with the addition of the new operative suite. All anticipated capital
expenditures, can and will be funded from operating revenues.
SurgiCare does not foresee any trend or uncertainties that would
impact the long or short-term liquidity of the company.
The company is in active negotiations with outside funding sources in order
to secure the funding required in order to begin its expansions through its
merger and acquisition model.
PART II
OTHER INFORMATION
ITEM 1.
Legal Proceedings
SurgiCare is not currently involved in any legal proceedings.
ITEM 2.
Change in Securities and Use of Proceeds
None
ITEM 3.
Default Upon Senior Securities
SurgiCare has not defaulted on any payments of principal or interest on
any securities.
ITEM 4.
Submission of Matters to a Vote of Security Holder
At the annual meeting of shareholders (the "Annual Meeting") of SurgiCare,
Inc. (the "Company") on Wednesday, July 26 2000, at 6:30 P.M. at the corporate
offices located at 6699 Chimney Rock, Suite 105, Houston, Texas 77081, the
following items where submitted to security holders for vote:
(1) To elect Nine directors of the Company;
(2) To act upon the recommendation of the Board of Directors on the
appointment of Weinstein Spira & Company L.L.P. as the Company's independent
auditors for 2000; and The nine Directors that where elected by majority vote
where;
Dr. David Blumfield President/CEO
Dr. Jeff Penso Vice President
Dr. Sherman Nagler
Dr. Michael Mineo
Dr. Son Nguyen
Dr. William Bradbury
Dr. Bruce Miller
Dr. Buddy Huffmyer
Mr. Charles Cohen
Weinstein Spira & Company L.L.P. was appointed as the Company's independent
auditors for 2000. Services provided to the Company and its subsidiaries by
Weinstein Spira shall include the audit of the Company's consolidated financial
statements and the 401(k) Plan, services related to filings with the Securities
and Exchange Commission, tax filings and consultations on various tax and
acquisition due diligence matters.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: November10, 2000 REGISTRANT:
SurgiCare, Inc
By: /s/ David Blumfield
Dr. David Blumfield
President and CEO
By: /s/ CHARLES S. COHEN
Charles S. Cohen
Chief Operating Officer
ITEM 6.
INDEX TO EXHIBITS
DESCRIPTION
EXHIBIT
NUMBER
3.1 * Amended and Restated Certificate of Incorporation of
SurgiCare, Inc.
3.2 * Articles of Incorporation of Bellaire SurgiCare, Inc.
3.3 * By-Laws of Technical Coatings Incorporated
(now SurgiCare, Inc.)
3.4 * By-Laws of Bellaire SurgiCare, Inc.
4 * Certificate of Designation, Powers, Preferences and Rights
of Series A Redeemable Preferred Stock, par value $.001
per share, of SurgiCare, Inc.
10.1 * Agreement, dated July 29,1999, between
SurgiCare, Inc. and Surgery Centers of
America II, Inc.
10.2 * Letter agreement with SCOA
27 * Financial Data Schedule
* Incorporated herein by reference to the Company's Current Report on form 10-SB
filed on August 20, 1999.
