FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission File No.: 0-19897
SMT HEALTH SERVICES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-1672183
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10521 PERRY HIGHWAY, WEXFORD, PENNSYLVANIA 15090
(Address of principal executive offices)
412-933-3300
(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:
At April 30, 1997, 5,684,081 shares of Common Stock, $0.01 par value, of
the registrant were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SMT Health Services Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
1997 1996
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents - unrestricted $13,566,007 $ 4,643,158
Cash and cash equivalents - restricted 400,000 400,000
Accounts receivable - no allowance for
doubtful accounts 1,985,813 1,726,442
Notes receivable - current portion 39,616 52,240
Receivable from the sale of leases
secured by equipment-current portion (Note 4) 357,124 387,999
Other current assets 452,535 615,257
Total current assets 16,801,095 7,825,096
PROPERTY AND EQUIPMENT:
Equipment 188,463 200,709
Furniture and fixtures 55,885 43,055
Vehicles 193,762 162,915
Leasehold improvements 28,495 28,495
Mobile MRI equipment 35,980,966 35,932,207
Total property and equipment 36,447,571 36,367,381
Less accumulated depreciation and amortization ( 8,216,184) ( 6,734,353)
Property and equipment, net 28,231,387 29,633,028
OTHER ASSETS:
Receivable from the sale of leases
secured by equipment- noncurrent (Note 4) 428,774 490,591
Contract and license acquisition costs, net of
accumulated amortization of $108,000 and
$15,000, respectively 611,143 631,933
Deposits and other assets 592,764 594,915
Deferred income taxes 192,000 322,000
Total other assets 1,824,681 2,039,439
TOTAL ASSETS $46,857,163 $39,497,563
See Notes to Consolidated Financial Statements.
SMT Health Services Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
March 31, December 31,
1997 1996
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 573,687 $ 363,682
Accrued wages and related taxes 23,414 111,664
Current portion of long-term debt and capital
lease obligations 5,358,792 6,349,962
Other current liabilities 711,085 412,748
Total current liabilities 6,666,978 7,238,056
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS -
less current portion 16,060,557 20,859,964
Total liabilities 22,727,535 28,098,020
STOCKHOLDERS' EQUITY:
Common Stock, $0.01 par value; authorized
10,000,000 shares; issued and
outstanding 5,684,000 and
3,695,030, respectively 56,840 36,950
Cumulative Convertible Preferred Stock;
$0.01 par value;authorized 994,600 shares;
no shares issued and outstanding -- --
Additional paid-in capital (Note 5) 24,211,041 12,081,614
Retained earnings (accumulated deficit) ( 138,253) ( 719,021)
Total stockholders' equity 24,129,628 11,399,543
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $46,857,163 $39,497,563
See Notes to Consolidated Financial Statements.
SMT Health Services Inc. and Subsidiaries
Consolidated Statements of Earnings (unaudited)
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
REVENUES:
Service revenue $ 6,239,307 $ 4,128,035
Interest income 102,068 53,166
Total revenues 6,341,375 4,181,201
COSTS AND EXPENSES:
Operating expenses 1,985,299 1,365,973
Depreciation and amortization 1,559,792 989,174
Selling, general and administrative 941,871 682,266
Interest - third parties 568,473 457,307
Interest - related parties 34,172 --
Total costs and expenses 5,089,607 3,494,720
Income before income taxes and extraordinary item 1,251,768 686,481
Income taxes (Note 5) 490,000 229,000
Net income before extraordinary item 761,768 457,481
Extraordinary loss on early extinguishment of
debt (net of income tax benefit of $115,000)
(Note 10) 181,000 --
Net income $ 580,768 $ 457,481
Earnings Per Common Share:
Earnings before extraordinary item $ .16 $ .13
Extraordinary loss per share (Note 10) ( .04) --
Net earnings per Common Share $ .12 $ .13
Weighted Average Shares outstanding (Note 2) 4,442,714 2,840,208
See Notes to Consolidated Financial Statements.
SMT Health Services Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 580,768 $ 457,481
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary loss on early
extinguishment of debt 296,000 --
Depreciation and amortization 1,559,792 989,174
Deferred income taxes 275,000 170,000
Changes in assets and liabilities:
Accounts and notes receivable ( 246,747) ( 255,463)
Other current assets 162,722 ( 43,083)
Accounts payable and other 508,342 98,858
Accrued wages and related taxes ( 88,250) ( 49,575)
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,047,627 1,367,392
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment ( 117,859) ( 634,603)
Construction of leasehold improvements -- ( 1,330)
Payment for purchase of acquired entity -- ( 642,840)
Net change in cash restricted for equipment
financing purposes -- 330,000
Other ( 17,351) 107,978
NET CASH USED IN INVESTING ACTIVITIES ( 135,210) ( 840,795)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term debt
and capital leases:
Third parties ( 1,400,110) ( 1,004,909)
Related parties ( 61,340) --
Principal pay-off of capital leases ( 4,236,435) --
Extraordinary loss on early
extinguishment of debt ( 296,000) --
Issuance of Common Stock from exercise of
warrants and stock options 12,004,317 --
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 6,010,432 ( 1,004,909)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS - (unrestricted) 8,922,849 ( 478,312)
CASH AND CASH EQUIVALENTS - (unrestricted) -
Beginning of period 4,643,158 2,341,519
CASH AND CASH EQUIVALENTS - (unrestricted) -
End of period $13,566,007 $1,863,207
See Notes to Consolidated Financial Statements.
SMT Health Services Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For The Three Month Period Ended March 31, 1997
(Unaudited)
Retained
Additional Earnings/ Total
Common Stock Preferred Stock Paid-In (Accum. Stockholders'
Shares Amount Shares Amount Capital Deficit) Equity
BALANCES
-December
31, 1996 3,695,030 $36,950 -- $ -- $12,081,614 ($719,021) $11,399,543
Exercise of
Warrants and
Stock Options
(Note 8) 1,988,970 19,890 -- -- 11,984,427 -- 12,004,317
Tax Adjustment
Resulting
From Stock
Option and
Warrant
Exercises
(Note 5) -- -- -- -- 145,000 -- 145,000
Net Income -- -- -- -- -- 580,768 580,768
BALANCES
-March 31,
1997 5,684,000 $56,840 -- $ -- $24,211,041 $ 138,253) $24,129,628
See Notes to Consolidated Financial Statements.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 - BASIS OF PRESENTATION
SMT Health Services Inc. and its wholly owned subsidiaries (the "Company") are
engaged primarily in providing medical diagnostic imaging services to
hospitals, physicians and patients. The Company, through its subsidiaries,
currently operates nineteen (including a new MRI unitacquired in April 1997)
mobile Magnetic Resonance Imaging (MRI) Units ("MRI Units") in Pennsylvania,
West Virginia, North Carolina, South Carolina, Virginia, Kentucky and Ohio.
The Company's Common Stock currently trade on the National Association of
Securities Dealers, Inc. Automated Quotations Systems (NASDAQ) National Market
System under the symbol "SHED".
The unaudited consolidated financial statements as of and for the three month
periods ended March 31, 1997 and 1996 include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The unaudited consolidated financial statements included herein have been
prepared by management in accordance with the rules and regulations of the
Securities and Exchange Commission ("SEC"). Certain information and footnote
disclosures which are normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted in accordance with SEC informational requirements.
The financial statements reflect normal recurring accounting adjustments
which, in the opinion of management, are necessary for a fair presentation of
the financial position and results of operations for the interim period. The
results of operations for the three month period ended March 31, 1997 are not
necessarily indicative of the results for the entire current fiscal year
ending December 31, 1997. The consolidated financial statements included
herein should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's Form 10-K for the
year ended December 31, 1996 which is on file at the Securities and Exchange
Commission.
Certain amounts in the March 31, 1996 Statements of Earnings and Cash Flows
have been reclassified to conform with the March 31, 1997 presentation.
NOTE 2 - NET EARNINGS PER COMMON AND COMMON SHARE EQUIVALENT
The net earnings per common and common share equivalent are calculated using
the weighted average common and common share equivalents outstanding during
the year, except where anti-dilutive. Common share equivalents include
shares issuable upon the exercise of stock options, rights and warrants less
the number of shares assumed purchased with the proceeds available from
the assumed exercise of the options, rights and warrants.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
MARCH 31, 1997
NOTE 2 - NET EARNINGS PER COMMON AND COMMON SHARE EQUIVALENT
(Continued)
The Treasury Stock Method of reflecting use of proceeds from options and
warrants may not adequately reflect potential dilution if options and warrants
to acquire a substantial number of Common Shares (greater than 20% of the
number of Common Shares outstanding for the period for which the computation
is being made) are outstanding. In such instances, the Modified Treasury
Stock Method must be utilized.
The Company's options and warrants to acquire Common Shares exceeded 20% of
the number of Common Shares outstanding for the three months ended March 31,
1997 and 1996 and accordingly, the Treasury Stock Method has been modified in
determining the dilutive effect of the options and warrants on earnings per
share data for those periods.
Fully diluted earnings per common share are anti-dilutive and, accordingly,
are not presented.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. This
Statement is effective for financial statements issued for periods ending
after December 15, 1997 including "interim" periods and earlier application is
not permitted. In summary, the Statement simplifies the standards for
computing earnings per share primarily found in APB Opinion No. 15, Earnings
Per Share and makes them comparable to international standards. The standard
replaces the presentation of Primary Earnings Per Share with a presentation of
Basic Earnings Per Share. It also requires dual presentation of basic and
diluted earnings per share on the income statement of all entities with
complex capital structures.
Basic EPS excludes dilution and is computed by dividing income available to
Common Stockholders by the weighted average number of Common Shares
outstanding for the period. Diluted EPS reflects potential dilution that could
occur if securities or other contracts to issue Common Stock were exercised or
converted into Common Stock or resulted in the issuance of Common Stock that
then shared in the earnings of the entity. Diluted EPS is computed similarly
to fully diluted EPS pursuant to Opinion 15.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
MARCH 31, 1997
NOTE 2 - NET EARNINGS PER COMMON AND COMMON SHARE EQUIVALENT
(Continued)
Had the Company been permitted to adopt the Statement as of January 1, 1997,
the first quarter pro forma Basic and Diluted EPS would have been:
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
Basic:
Earnings before extraordinary item $ .17 $ .16
Extraordinary loss per share ( .04) --
Net Basic Earnings per share $ .13 $ .16
Diluted:
Earnings before extraordinary item $ .16 $ .13
Extraordinary loss per share ( .04) --
Net Diluted Earnings per share $ .12 $ .13
Weighted Average Shares Outstanding 4,442,714 2,840,208
NOTE 3 - CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
The Company is engaged primarily in providing mobile MRI services to small-to
- -medium-sized hospitals in Pennsylvania, West Virginia, North Carolina, South
Carolina, Virginia, Kentucky and Ohio.
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.
Certain Significant Estimates: The Company operates mobile MRI Units which
are capital intensive and subject to changes in technology. The Company
primarily leases or finances such equipment over a 60 month period and
depreciates the equipment over the respective finance period to an estimated
residual value which typically approximates 20% of the original cost of the
equipment. The useful lives and residual values estimated by management are
considered significant estimates. Management does not currently anticipate
significant technological advances which could significantly affect its
estimates.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
MARCH 31, 1997
NOTE 3 - CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES (Continued)
The Company is not dependent on any one customer or geographic region as a
source of its revenues. However, the Company utilizes the services of Hospital
Shared Services to process approximately 29% of its billings and collections.
NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consist of the following:
March 31, December 31,
1997 1996
Capital lease and loan obligations $21,419,349 $27,209,926
Less current portion 5,358,792 6,349,962
$16,060,557 $20,859,964
The total cost and accumulated amortization of property securing capital lease
and loan obligations at March 31, 1997 were approximately $29,574,000 and
$6,279,000, respectively. Interest rates related to such long-term debt and
capital leases range from approximately 8.0% to 10.5%.
During March 1997, the Company paid-off the remaining principal balance of
three capital lease obligations totaling $4,236,000. The interest rates
under these capital leases ranged from 10.6% to 13.5% and the monthly cashflow
savings approximates $128,000 (Note 10).
The long-term debt and capital lease obligations balance includes
approximately $786,000 of capital lease obligations due to third parties
related to the equipment at the Auburn Regional Center for Cancer Care and
Airport Regional Imaging Center, which the Company had treated as
discontinued operations and sold in October 1994 and June 1995, respectively.
Accordingly, the Company has recorded an offsetting receivable for the lease
receivables due from the purchasers of the centers. Such lease receivables
are secured by the equipment and accounts receivable of the centers.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
MARCH 31, 1997
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109). Deferred income taxes are
provided to account for temporary differences between financial statement
accounting and income tax reporting and relate principally to differences in
reporting for diagnostic medical equipment, depreciation, accrued expenses
and net operating loss carryforwards.
As a result of the exercise of stock options and warrants pursuant to the
Company's 1991 Employee Stock Option Plan and the 1995 Director Warrant Plan,
respectively, during the first quarter of 1997, the Company is entitled to a
tax deduction of approximately $582,000. The deduction relates to the
difference between the option exercise price and the fair market value of the
Common Stock at the time of such exercises. In accordance with SFAS 109, the
Company recorded a deferred tax asset of approximately $145,000 related to
this deduction and in accordance with Accounting Principles Board Opinion 25
(APB 25) a corresponding credit was made to additional paid-in capital.
Management believes no deferred tax asset valuation allowance is necessary as
of March 31, 1997.
At March 31, 1997, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $5.9 million and $7.1
million, respectively, which are available to offset future federal and state
taxable income through 2010 and 1999, respectively.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
The total amount of interest payments during the three months ended March 31,
1997 and 1996 were approximately $640,000 and $471,000, respectively. In
addition, income tax payments for the three month periods ended March 31, 1997
and 1996 were approximately $8,800 and $56,000, respectively.
NOTE 7 - ACQUISITION
On March 21, 1996, the Company purchased certain assets of a mobile provider
which operated mobile units in the state of North Carolina (the "Seller").
The purchase price approximated $600,000 in cash [net of negotiated trade-in
value of approximately $500,000 (which approximated the purchase price of the
units acquired) for two of the Seller's mobile MRI units] in exchange for MRI
Programs including Certificate of Need licenses or exemptions and certain
customer service contracts. The Company traded-in and upgraded one of the
purchased units to newer technology in April 1996 and traded-in and upgraded
the second unit during July 1996.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
MARCH 31, 1997
NOTE 8 - STOCK OPTIONS AND WARRANTS
During the first quarter of 1997, stock options and Warrants covering 20,000
and 80,250 shares of Common Stock, respectively, were exercised pursuant to
the Company's 1991 Employee Stock Option Plan and the 1995 Director Warrant
Plan. The Company received approximately $46,000 and $291,000 as a result of
such stock option and Warrant exercises, respectively. At March 31, 1997
options to purchase 619,432 shares and Warrants to purchase 454,750 shares
were exercisable pursuant to the employee stock option plans and director
warrant plan, respectively.
During January through March 4, 1997 (the publicly traded Warrants expired at
5:00 p.m. on March 4, 1997) 1,677,000 Warrants were exercised and the Company
issued 1,882,000 shares of Common Stock of the Company. The Company received
net cash proceeds of approximately $11.7 million as a result of such Warrant
exercises. The Warrants ceased trading on March 5, 1997.
NOTE 9 - COMMON STOCK DIVIDEND
On January 14, 1997, the Company issued 247,130 Common Shares in accordance
with a 7% Common Stock dividend for all shareholders of record on January 10,
1997. The December 31, 1996 financial statements have been adjusted to
reflect this post balance sheet equity activity. Further, in accordance with
APB 15, the Company has reflected the 7% Common Stock dividend in calculating
earnings per share for both periods presented.
NOTE 10 - EXTINGUISHMENT OF DEBT
During March 1997 the Company paid-off the remaining principal balance of
three capital lease obligations totaling $4,236,000. The total amount paid
to extinguish the capital leases totaled $4,532,000. The difference between
the amount paid to extinguish the capital leases and the net carrying amount
of the debt totaled $296,000, relating primarily to pre-payment penalties,
and has been recorded as an extraordinary loss, net of income taxes, in
accordance with Accounting Principles Board Opinion No. 26 Early
Extinguishment of Debt (APB 26). The interest rates under the capital leases
ranged from 10.6% to 13.5%. The monthly cashflow savings approximates
$128,000 and the interest expense savings for 1997 approximates $400,000
before income taxes.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
MARCH 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Any statements released by the Company that are forward-looking are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that forward-looking statements
involve risks and uncertainties which may affect the Company's business and
prospects, including economic, competitive, governmental, technological and
other factors discussed in the Company's filings with the Securities and
Exchange Commission.
The discussion that follows should be read in conjunction with the
accompanying unaudited Consolidated Financial Statements and Notes thereto of
SMT Health Services Inc. and Subsidiaries.
Results of Operations
The following table sets forth for the periods indicated the percentages which
the items in the Statement of Earnings bear to revenues and the dollar
increase (decrease) of such items as compared to the corresponding period in
the prior year.
Percentage of Revenue Increase (Decrease)
Prior Year
Three Three
Months Ended Months Ended
3/31/97 3/31/96 3/31/97
Revenues 100% 100% $2,160,000
Cost & Expenses:
Operating 31% 33% 619,000
Depreciation & Amortization 24% 24% 571,000
S, G & A 15% 16% 260,000
Interest 10% 11% 145,000
Total Costs and Expenses 80% 84% 1,595,000
Income Before Income Taxes and
Extraordinary Item 20% 16% 565,000
Income Taxes 8% 5% 261,000
Net Income Before
Extraordinary Item 12% 11% 304,000
Extraordinary Loss on Early
Extinguishment of Debt 3% -- 181,000
Net Income 9% 11% $123,000
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
MARCH 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (continued)
Three Months Ended March 31, 1997 Compared To The Three Months Ended
March 31, 1996
Revenues for the first quarter of 1997 increased $2,160,000, or 52%, to
$6,341,000 compared to $4,181,000 for the first quarter of 1996. The increase
in revenue is principally due to three new units placed into service during
the latter part of the 1996 first quarter as well as four additional units
subsequently placed into service during 1996. In addition, the upgrade of
three units to newer technology during 1996 and increased utilization of the
Company's mobile MRI units also contributed to the increased revenue.
Revenues derived from hospitals which the Company serviced in both comparable
periods increased approximately 22% during the first quarter of 1997 compared
to the first quarter of 1996 primarily as a result of increased MRI
procedures. The Company operated an average of approximately 18 units during
the first quarter of 1997 compared to approximately 12 units during the 1996
first quarter. During the first quarter of 1997, the Company performed 15,137
MRI scans representing an increase of 5,645, or 59%, over the 9,492 MRI scans
during the first quarter of 1996. Average scans per day per unit increased
.6 to 11.6 scans per day during the first quarter 1997 compared to 11.0
during the first quarter 1996. The average fee per scan approximated $398
for the first quarter of 1997 versus $420 for the first quarter of 1996.
The $22, or 5%, decrease in average fee per scan primarily related to
discounted fees provided to customers based upon higher scan volumes.
Operating expenses increased $619,000, or 45%, to $1,985,000 during the first
quarter of 1997 compared to $1,366,000 during the first quarter of 1996.
Approximately $542,000, or 88%, of the increase is due to operating expenses
associated with the three new units purchased between February and March of
the 1996 first quarter as well as the four additional units subsequently
purchased during 1996. The remaining increase of $77,000, or 12%, is
primarily due to higher payroll costs for operational personnel slightly
offset by lower maintenance contract and employee benefits expense.
Operating expenses per scan decreased $13, or 9%, to approximately $131
compared to $144 per scan during the first quarter of 1996 primarily due to
higher scan volumes.
Depreciation and amortization expenses increased $571,000, or 58%, in the
first quarter of 1997 to $1,560,000 from $989,000 during the first quarter of
1996. This increase was primarily due to depreciation expense associated with
the three new units purchased between February and March of the 1996 first
quarter, the four additional units subsequently purchased during 1996 as well
as the upgrade of three units to newer technology during 1996.
Selling, general and administrative costs in the first quarter of 1997
increased $260,000 to $942,000, or 15% of revenues, compared to $682,000, or
16% of revenues during the first quarter of 1996. The increase is primarily
due to an approximate $139,000 increase in executive compensation and costs
related to the Company's management bonus plan. The remaining increase is
primarily due to higher marketing and advertising related to the Company's
Joint Commission accreditation and stock promotion costs.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
MARCH 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (continued)
Three Months Ended March 31, 1997 Compared To The Three Months Ended
March 31, 1996
(Continued)
Interest expense for the first quarter of 1997 increased $145,000 to $602,000
from $457,000 in the first quarter of 1996, primarily as a result of the three
new units purchased between February and March of the 1996 first quarter, the
four additional units subsequently purchased during 1996 as well as the
upgrade of three units to newer technology during 1996. However, interest
expense decreased as a percentage of revenue to 10% in the first quarter of
1997 compared to 11% of revenue in the first quarter of 1996. This decrease
as a percentage of revenue is primarily due to higher down payments on new and
upgraded mobile MRI units as well as more favorable lease terms obtained on
unit financings and refinancings during 1996.
The Company reported net income before an extraordinary loss of $762,000, or
$.16 per share, during the first quarter of 1997 versus $458,000, or $.13 per
share during the first quarter of 1996. Income tax expense for the first
quarter of 1997 was $490,000, an effective tax rate of approximately 39%, as
compared to income tax expense of $229,000, an effective tax rate of
approximately 33%, for the first quarter of 1996. The increase in income tax
expense reflects the significant increase in profitability of the Company
during the first quarter of 1997. The Company reported an extraordinary loss
on early extinguishment of debt (see Note 10 to the Company's Unaudited
Consolidated Financial Statements included in Item 1 and incorporated herein
by reference) of $181,000, or $.04 per share, net of an income tax benefit of
$115,000, primarily as a result of pre-payment penalties related to the debt
pay-off.
During the three months ended March 31, 1997, the Company's cash provided by
operations was $3,048,000 as compared to $1,367,000 during the three months
ended March 31, 1996. This increase of $1,681,000 is primarily due to
approximately $991,000 of increased income before depreciation and
amortization and an extraordinary loss on financing activities, $105,000
increase in deferred income tax expense, increased accounts payable and other
current liabilities of $409,000, and a $205,000 decrease in other assets
primarily due to the collection of a sales tax refund in January 1997.
The Company used cash in investing activities during the three months ended
March 31, 1997 of $135,000, primarily related to the purchase of various
types of equipment.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
MARCH 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company obtained cash from financing activities during the three months
ended March 31, 1997 of approximately $6,010,000 primarily related to the
$12,004,000 received upon the exercise of warrants and stock options during
the first quarter of 1997, including the conversion of 1,677,000 publicly
traded warrants which resulted in the issuance of 1,882,000 shares of Common
Stock and proceeds of approximately $11,700,000 (see Note 8 to the Company's
Unaudited Consolidated Financial Statements included in Item 1 and
incorporated herein by reference). This increase was offset by $1,461,000 of
principal payments under long-term debt and capital leases as well as the
principal pay-off of three capital leases totaling $4,532,000. The interest
rates under these capital leases ranged from 10.6% to 13.5% and will result
in monthly cashflow savings of approximately $128,000 (see Note 10 to the
Company's Unaudited Consolidated Financial Statements included in Item 1 and
incorporated herein by reference). The Company experienced a net increase in
unrestricted cash and cash equivalents of approximately $8,923,000 during the
three months ended March 31, 1997 and maintained an unrestricted cash balance
at March 31, 1997 of approximately $13,566,000. The Company also maintained
a restricted cash balance of $400,000 at March 31, 1997.
The Company's trade accounts receivable balance increased by $259,000 to
$1,986,000 at March 31, 1997, primarily due to higher service revenues during
the quarter ended March 31, 1997. In the experience of the Company, average
accounts receivable collections typically do not exceed 40 days, as there are
no billings subject to traditional third-party payors, and the accounts
receivable balance turned over approximately three times during the three
months ended March 31, 1997. Approximately 29% of the Company's billings and
collections are processed through Hospital Shared Services ("HSS"), a
representative of certain hospitals. As a fee for these services, HSS
retains approximately 2.5% of gross billings to these hospitals and the
Company records the service revenues and related receivables net of such fees.
At March 31, 1997, the Company had working capital of $10,134,000. In
addition, the Company's cash flow from operations totaled $3,048,000 for the
three months ended March 31, 1997 and the Company continues to generate a
positive cash flow. The Company has been able to meet all past debt service
obligations, currently is able to meet all such obligations, and anticipates
it will continue to meet such obligations. As in the past, management
anticipates that such obligations will be funded by the revenues generated by
the Mobile Units.
To date, the Company has financed its equipment acquisitions and working
capital requirements with loans and leases, from internal cash flow and
capital contributions. As of March 31, 1997, the Company was a party to
leases and loans covering all but three of its mobile MRI units. The
aggregate outstanding principal balance of all such leases and loans was
approximately $21,419,000 at March 31, 1997.
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
MARCH 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The Company has outstanding a letter-of-credit totaling $400,000 related to
equipment financing at a freestanding diagnostic imaging center which it sold
in June 1995 and on which it remains obligated (see Note 4 of the Company's
Unaudited Consolidated Financial Statements included in Item 1, which is
incorporated herein by reference).
During the three months ended March 31, 1997, the Company signed long-term
contracts with 6 new customers and extended for an additional two to three
years 2 existing customer contracts. As of March 31, 1997, the Company
serviced approximately 81 total customers.
At March 31, 1997, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $5.9 million and $7.1
million, respectively, which are available to offset future federal and state
taxable income through 2010 and 1999, respectively (See Note 5 of the
Company's Unaudited Consolidated Financial Statements included in Item 1 and
incorporated herein by reference).
On January 14, 1997, the Company paid a 7% Common Stock dividend to all
shareholders of record on January 10, 1997 (See Note 9 of the Company's
Unaudited Consolidated Financial Statements included in Item 1 and
incorporated herein by reference).
The Company received Accreditation with Commendation from the Joint
Commission for the Accreditation of Healthcare Organizations ("JCAHO") in
January 1997.
During January through March 4, 1997, approximately 1,677,000 Warrants were
exercised and the Company issued approximately 1,882,000 shares of its Common
Stock. The Company received net cash proceeds of approximately $11.7 million
as a result of such Warrant exercises (See Note 8 of the Company's Unaudited
Consolidated Financial Statements included in Item 1, which is incorporated
herein by reference).
On April 12, 1997 the Company took delivery of and began operation of a new
1.0 Tesla mobile MRI unit. This unit cost approximately $1.9 million and the
Company financed approximately $1.5 million over a 60 month period requiring
monthly payments of approximately $30,000.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. This
Statement is effective for financial statements issued for periods ending
after December 15, 1997 including "interim" periods and earlier application
is not permitted. In summary, the Statement simplifies the standards for
computing earnings per share primarily found in APB Opinion No. 15, Earnings
Per Share and makes them comparable to international standards. The standard
replaces the presentation of Primary Earnings Per Share with a presentation of
Basic Earnings
SMT HEALTH SERVICES INC. AND SUBSIDIARIES
MARCH 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
Per Share. It also requires dual presentation of basic and diluted earnings
per share on the income statement of all entities with complex capital
structures.
Basic EPS excludes dilution and is computed by dividing income available to
Common Stockholders by the weighted average number of Common Shares
outstanding for the period. Diluted EPS reflects potential dilution that
could occur if securities or other contracts to issue Common Stock were
exercised or converted into Common Stock or resulted in the issuance of
Common Stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS pursuant to Opinion 15.
Had the Company been permitted to adopt the Statement as of January 1, 1997,
the first quarter pro forma Basic and Diluted EPS would have been:
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
Basic:
Earnings before extraordinary item $ .17 $ .16
Extraordinary loss per share ( .04) --
Net Basic Earnings per share $ .13 $ .16
Diluted:
Earnings before extraordinary item $ .16 $ .13
Extraordinary loss per share ( .04) --
Net Diluted Earnings per share $ .12 $ .13
Weighted Average Shares Outstanding 4,442,714 2,840,208
Management believes that the healthcare industry continues to be in a period
of consolidation characterized by mergers, joint ventures, acquisitions, sales
of all or part of healthcare companies or their assets, and other partnering
and investment transactions of various structures and sizes involving
healthcare companies. The Company continues to evaluate new opportunities
that allow for the expansion of its business through the acquisition of
additional Mobile Units in geographic proximity to its existing regional
markets or in locations that can serve as a basis for new market areas. The
Company, like other healthcare companies, has participated from time to time
and is participating in preliminary discussions with third parties regarding
a variety of potential transactions, and the Company has considered and
expects to continue to consider and explore potential transactions of various
types with other healthcare companies. However, no assurances can be given
as to whether any such transactions may be consummated or, if so, when.
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
11.01 Earnings Per Share Computation .Filed herewith.
27.01 Financial Data Schedule . .Filed herewith.
99.01 Press release dated March 17, 1997. .Filed herewith.
99.02 Press release dated April 23, 1997. .Filed herewith.
(b) Report on Form 8-K.
During the quarter ended March 31, 1997, the Company filed one
report on Form 8-K for the press release dated February 5, 1997
regarding the 1996 earnings.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
understanding thereunto duly authorized.
SMT Health Services Inc.
(Registrant)
Date: May 12, 1997 By: /s/ Jeff D. Bergman
Jeff D. Bergman
Chairman and Chief Executive Officer
Date: May 7, 1997 By: /s/ David A. Zynn
David A. Zynn
Chief Financial Officer, Treasurer
and Principal Accounting Officer
EXHIBIT INDEX
Exhibit No. Reference
11.01 Earnings Per Share Computation Filed herewith.
27.01 Financial Data Schedule Filed herewith.
99.01 Press release dated March 17, 1997 Filed herewith.
99.02 Press release dated April 23, 1997 Filed herewith.
11.01
SMT
EPS Calculation-Modified Treasury Stock Method
Year Ended December 31, 1997 (First Quarter 3/31/97)
(Before Extraordinary Item)
Exercise Assumed Tax Total
Assumptions Shares Price Proceeds Benefit Proceeds
Net income
before
extraordinary item $761,768
Common Shares
Outstanding 4,442,714
20% of Common
Shares
Outstanding 888,543
Common Stock
Equivalent (Aggregate):
Warrants-IPO 0 $7.00 $0
Effect of 5% Dividend 0
Options- employees
1993 Grant 129,764 $3.10 $402,268 $274,165
1994 Grant 54 $1.27 $69 $152
1995 Grant 19,323 $2.29 $44,250 $46,773
1995 Grant- #2 160,500 $3.54 $568,170 $312,269
1996 Grant 42,479 $4.19 $177,987 $72,155
1996 Grant #2 267,500 $6.40 $1,712,000 $229,729
1997 Grant 0 $10.00 $0 $0
Options- Directors:
1992 Grant 2,247 $2.99 $6,719 $4,841
1993 Grant 2,247 $1.66 $3,730 $5,977
1994 Grant 2,247 $2.05 $4,606 $5,644
1995 Grant 2,247 $4.07 $9,145 $3,919
1996 Grant 6,741 $6.21 $41,862 $6,276
Warrants-Directors
All 425,000 $3.88 $1,649,000 $771,970
7% Dividend 29,750 $0.00 $0
Warrants- Commonwealth 0 $4.47 $0
Underwriter options 0 $5.94 $0
Underwriter
Warrants (Unit) 0 $7.00 $0
5% dividend on
Warrants 0
Total CSE
Aggregate 1,090,099 4,619,805 1,733,870 $6,353,676
Average and Quarter End Market
Value:
Average Closing Bid $8.66
Quarter End Closing Bid $8.50
Computation: Primary Fully Diluted
Total Proceeds $6,353,676 $6,353,676
Application of
assumed proceeds:
Toward
repurchase of
o/s shares $6,353,676 $6,353,676
Toward Paydown
of debt $0 $0
$6,353,676 $6,353,676
Adjustment to
Net Income:
Net income $761,768 $761,768
Interest expense
reduction:
Debt paydown
* avg. int rate
* tax effec $0 $0
Adjusted
Net Income $761,768 $761,768
Adjustments
to Shares
Outstanding:
Actual
shares o/s 4,442,714 4,442,714
Net additional
shares 356,418 342,608
Adjusted
shares o/s 4,799,132 4,785,322
Earnings Per
Share before
extraordinary item:
Before adjustment $0.17 $0.17
After adjustment $0.159 $0.16
SMT
EPS Calculation-Modified Treasury Stock Method
Year Ended December 31, 1997 (First Quarter 3/31/97)
(After Extraordinary Item)
Exercise Assumed Tax Total
Assumptions Shares Price Proceeds Benefit Proceeds
Net income
after
Extraordinary
item $580,768
Common Shares
Outstanding 4,442,714
20% of Common
Shares Outstanding 888,543
Common Stock
Equivalent
(Aggregate):
Warrants-IPO 0 $7.00 $0
Effect of
5% Dividend 0
Options- employees
1993 Grant 129,764 $3.10 $402,268 $274,165
1994 Grant 54 $1.27 $69 $152
1995 Grant 19,323 $2.29 $44,250 $46,773
1995 Grant- #2 160,500 $3.54 $568,170 $312,269
1996 Grant 42,479 $4.19 $177,987 $72,155
1996 Grant #2 267,500 $6.40 $1,712,000 $229,729
1997 Grant 0 $10.00 $0 $0
Options- Directors:
1992 Grant 2,247 $2.99 $6,719 $4,841
1993 Grant 2,247 $1.66 $3,730 $5,977
1994 Grant 2,247 $2.05 $4,606 $5,644
1995 Grant 2,247 $4.07 $9,145 $3,919
1996 Grant 6,741 $6.21 $41,862 $6,276
Warrants-Directors
All 425,000 $3.88 $1,649,000 $771,970
7% Dividend 29,750 $0.00 $0
Warrants- Commonwealth 0 $4.47 $0
Underwriter options 0 $5.94 $0
Underwriter
Warrants (Unit) 0 $7.00 $0
5% dividend on
Warrants 0
Total CSE Aggregate 1,090,099 4,619,805 1,733,870 $6,353,676
Average and Quarter End Market Value:
Average Closing Bid $8.66
Quarter End Closing Bid $8.50
Computation: Primary FullyDiluted
Total Proceeds $6,353,676 $6,353,676
Application of
assumed proceeds:
Toward
repurchase of
o/s shares $6,353,676 $6,353,676
Toward
Paydown of debt $0 $0
$6,353,676 $6,353,676
Adjustment to
Net Income:
Net income $580,768 $580,768
Interest expense
reduction:
Debt paydown
* avg. int rate
* tax effec $0 $0
Adjusted Net Income $580,768 $580,768
Adjustments to
Shares Outstanding:
Actual shares o/s 4,442,714 4,442,714
Net additional
shares 356,418 342,608
Adjusted shares
o/s 4,799,132 4,785,322
Earnings Per Share
after extraordinary
item:
Before adjustment $0.13 $0.13
After adjustment $0.121 $0.12
99.01
Contact: David Zynn, CFO James K. White, Managing Director
SMT Health Services Inc. Kehoe, White, Savage & Company, Inc.
(412) 933-3300 (310) 437-0655
http://www.smthealth.com
SMT HEALTH SERVICES INC.
ANNOUNCES 99.5% WARRANT CONVERSION
Pittsburgh, PA, March 17, 1997 -- SMT Health Services Inc. (NASDAQ/NMS:
SHED) today announced that 1,677,000, or 99.5%, of the publicly- traded
warrants (SHEDW) were converted to Common Stock on or before March 4, 1997,
the Warrant expiration date. As a result of the Warrant conversions, the
Company issued 1,882,000 shares of Common Stock and received proceeds of
approximately $11.7 million.
The Company's total Common Shares outstanding as of the date of this
announcement totaled approximately 5,685,000 and the Company maintained a
total cash balance of approximately $18.0 million.
SMT Health Services Inc., through its current fleet of eighteen mobile MRI
units, provides diagnostic imaging services to healthcare providers in
Pennsylvania, West Virginia, North Carolina, South Carolina, Virginia, Ohio
and Kentucky.
99.02
Contact: David Zynn, CFO James K. White, Managing Director
SMT Health Services Inc. Kehoe, White, Savage & Company, Inc.
(412) 933-3300 (310) 437-0655
http://www.smthealth.com
SMT HEALTH SERVICES INC. REPORTS FIRST QUARTER NET INCOME
BEFORE AN EXTRAORDINARY ITEM INCREASES 67%; REVENUES RISE
52%; REVENUES DERIVED FROM EXISTING CUSTOMERS INCREASES 22%
Pittsburgh, PA, April 23, 1997 -- SMT Health Services Inc. (NASDAQ/NMS:
SHED) today reported that net income for the quarter ended March 31, 1997,
before an extraordinary loss on extinguishment of debt, increased 67% to
$762,000, or $.16 per share, from $457,000, or $.13 per share, for the first
quarter of 1996. Revenues for the first quarter of 1997 increased $2,160,000,
or 52%, to $6,341,000 from $4,181,000 for the first quarter of 1996. The
Company attributed the income and revenue gain to increased revenues from six
new mobile units placed into service during 1996 as well as a 22% increase in
revenues derived from hospitals which the Company serviced during both
comparable quarters. Earnings gains were partially offset by a higher
effective tax rate of approximately 39% in the first quarter of 1997 versus
approximately 33% during the first quarter of 1996.
On March 17, 1997, the Company announced the conversion of 99.5% of its
publicly traded warrants which raised approximately $11.7 million. As a
result of the warrant conversion, at March 31, 1997 the Company had 5,684,000
shares of Common Stock outstanding. The Company utilized approximately $4.5
million of the proceeds to pay off three MRI unit leases with interest rates
ranging from 10.6% to 13.5%. The Company reported an extraordinary loss, net
of income tax benefit, of $181,000, or $.04 per share, related to the early
extinguishment of such leases. At March 31, 1997 the Company's cash balance
totaled $13,966,000 and its long term debt and capital lease obligations
totaled $21,420,000, reflecting the pay off of the three leases.
The Company also reported that it took delivery and began operation on April
12, 1997 of a previously announced mobile MRI unit servicing hospital clients
in the North Carolina and South Carolina regions.
SMT Health Services Inc., through its current fleet of nineteen mobile MRI
units, provides diagnostic imaging services to healthcare providers in
Pennsylvania, West Virginia, North Carolina, South Carolina, Virginia, Ohio
and Kentucky.
(table follows)
SMT HEALTH SERVICES INC.
AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
For The Three Months Ended
March 31,
1997 1996
Total Revenues $6,341,000 $4,181,000
Operating Expenses 1,985,000 1,366,000
Depreciation and
Amortization 1,560,000 989,000
Selling, General and
Administrative 942,000 683,000
Interest Expense 602,000 457,000
Total Costs and Expenses 5,089,000 3,495,000
Income Before Income
Taxes and
Extraordinary Item 1,252,000 686,000
Income Taxes 490,000 229,000
Net Income Before
Extraordinary Item 762,000 457,000
Extraordinary Loss On
Early Extinguishment
of Debt Net of Income
Tax Benefit of $115,000 181,000 --
Net Income $ 581,000 $ 457,000
Earnings Per Common Share:
Earnings Before
Extraordinary Items $ .16 $ .13
Extraordinary Loss
Per Share ( .04) --
Net Earnings Per
Common Share $ .12 $ .13
Average Number of
Shares Outstanding 4,442,714 2,654,400
# # #
# # #
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1997 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 13,966,007
<SECURITIES> 0
<RECEIVABLES> 1,985,813
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,801,095
<PP&E> 36,447,571
<DEPRECIATION> 8,216,184
<TOTAL-ASSETS> 46,857,163
<CURRENT-LIABILITIES> 6,666,978
<BONDS> 0
0
0
<COMMON> 56,840
<OTHER-SE> 24,072,788
<TOTAL-LIABILITY-AND-EQUITY> 46,857,163
<SALES> 6,239,307
<TOTAL-REVENUES> 6,341,375
<CGS> 0
<TOTAL-COSTS> 4,486,962
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 602,645
<INCOME-PRETAX> 1,251,768
<INCOME-TAX> 490,000
<INCOME-CONTINUING> 761,768
<DISCONTINUED> 0
<EXTRAORDINARY> 181,000
<CHANGES> 0
<NET-INCOME> 580,768
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
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