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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2000
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 number 0-20554
DYNACQ INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEVADA 76-0375477
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10304 INTERSTATE 10 EAST, SUITE 369, HOUSTON, TEXAS 77029
(address of principal executive offices) Zip Code
Registrants telephone number, including area code (713)673-6432
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issurer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 requirement for the past 90
days. Yes X. No __.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable dates.
Title of Each Class Outstanding at January 5, 2001
Common Stock, $0.001 par value 6,898,037 shares
Transitional Small Business Disclosure Format (check one)
Yes ______ No X
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PART I. - FINANCIAL INFORMATION
ITEM I. - FINANCIAL STATEMENTS
DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31,
2000 2000
------------- -----------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents 6,215,201 4,301,523
Accounts Receivable (Net of Allowance for 10,159,706 8,419,608
Doubtful Accounts)
Inventories 327,220 346,969
---------- ----------
Total Current Assets 16,702,127 13,068,100
FIXED ASSETS - NET 9,347,850 9,493,028
OTHER ASSETS - NET 610,753 485,113
---------- ----------
TOTAL ASSETS 26,660,730 23,046,241
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable 648,533 1,126,070
Accrued Liabilities 552,029 681,515
Current Maturities of Long-Term Debt 205,457 297,522
Income Taxes Payable 4,765,138 3,380,306
Deferred Income Taxes Payable 170,000 145,000
---------- ----------
TOTAL CURRENT LIABILITIES 6,341,157 5,630,413
LONG-TERM DEBT, NET OF CURRENT MATURITIES 408,472 387,965
DEFERRED INCOME TAXES PAYABLE 646,000 671,000
NEGATIVE GOODWILL, NET 549,683 549,683
MINORITY INTERESTS IN SUBSIDIARIES 1,794,645 1,238,671
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 Par Value,
5,000,000 Shares Authorized,
None Issued or Outstanding
Common Stock, $0.001 Par Value,
300,000,000 Shares Authorized
After 8 to 1 & 4 to 1 reverse stock split, & 100% stock
dividend on 1/10/2000, 7,658,856 Shares Issued and
Outstanding 7,659 7,659
Additional Paid In Capital 4,338,917 4,309,813
Retained Earnings 13,764,703 11,392,583
Less Treasury Stock, 784,469 shares at cost (1,190,506) (1,141,546)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 16,920,773 14,568,509
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 26,660,730 23,046,241
========== ==========
</TABLE>
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DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
NOVEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
NET REVENUES (net of contractual adjustments) 8,904,528 5,243,612
COST OF SALE 179,348 125,677
--------- ---------
GROSS PROFIT 8,725,180 5,117,935
LESS EXPENSES:
Contract payments to physicians 379,666 401,748
Compensation and benefits 1,076,754 959,571
Medical supplies 1,137,546 850,038
Other general and administrative expense 1,452,740 1,013,302
Depreciation and amortization 195,520 236,113
Rent and occupancy 175,034 80,951
Provision for uncollectible accounts 17,438 -
Interest 17,061 64,685
--------- ---------
Total Expenses 4,451,759 3,606,408
--------- ---------
NET INCOME FROM OPERATIONS 4,273,421 1,511,527
LESS PROVISION FOR INCOME TAXES 1,345,328 525,647
NET INCOME BEFORE MINORITY INTERESTS 2,928,093 985,880
MINORITY INTERESTS IN EARNINGS
OF SUBSIDIARIES (555,974) (116,668)
NET INCOME 2,372,119 869,212
BASIC EARNINGS PER COMMON SHARE: $0.35 $0.13
========= =========
DILUTED EARNINGS PER COMMON SHARE: $0.33 $0.13
--------- ---------
WEIGHTED AVERAGE COMMON SHARES-BASIC 6,865,064 6,519,222 (1)
WEIGHTED AVERAGE COMMON SHARES-DILUTED 7,159,350 6,684,836 (1)
</TABLE>
Note:
(1) Common shares presented in the corresponding quarter of the previous year in
computing the earnings per share are restated as if the 2 for 1 stock split
effected in the form of a 100% stock dividend on January 10, 2000 has been
retroactively applied for comparison purposes.
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DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
--------- ----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income 2,372,119 869,212
Add: Items not requiring cash:
Depreciation 195,520 236,113
Deferred Income Taxes, Net 0 155,647
Minority Interests 555,974 116,668
Adjustments to reconcile net income
to net cash provided by operating activities:
(Increase) Decrease in Accounts Receivable (1,740,098) (352,504)
(Increase) Decrease in Inventory 19,749 3,403
(Increase) Decrease in Other Current Assets 0 (60,000)
(Increase) Decrease in Other Assets (125,640) 2,843
Increase (Decrease) in Accounts Payable (477,537) (836,706)
Increase (Decrease) in Accrued Liabilities (129,486) 745,747
Increase (Decrease) in Income Taxes Payable 1,384,832 41,576
---------- ---------
Net Cash Provided by Operating Activities 2,055,433 921,999
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of Fixed Assets (50,341) (428,542)
---------- ---------
Net Cash (Used) by Investing Activities (50,341) (428,542)
CASH FLOW FROM FINANCING ACTIVITIES:
Retirements of Long-Term Debt, Net (71,558) (64,617)
Repayment of Notes Payable 0 (250,000)
Proceeds From Exercise of Option Shares 29,104 266,566
Acquisition of Treasury Stock , Net (48,960) 0
---------- ---------
Net Cash (Used) by Financing Activities (91,414) (48,051)
---------- ---------
Net Increase in Cash and Cash Equivalents 1,913,678 445,406
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,301,523 1,163,535
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF THE QUARTER 6,215,201 1,608,941
========== =========
</TABLE>
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DYNACQ INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2000
(UNAUDITED)
NOTE 1. - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by Dynacq
International, Inc. without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as allowed by such
rules and regulations, and management believes that the disclosures are adequate
to make the information presented not misleading. These financial statements
include all of the adjustments which, in the opinion of management, are
necessary for a fair presentation of financial position and results of
operations. All such adjustments are of a normal and recurring nature. These
unaudited financial statements should be read in conjunction with the audited
financial statements at August 31, 2000. Operating results for the three months
period ended November 30,2000 are not necessarily indicative of the results that
may be expected for the year ending August 31, 2001.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 2000
TO THE THREE MONTHS ENDED NOVEMBER 30, 1999
Consolidated net revenues after subtracting contractual adjustments with payors
from gross revenues for the three months ended November 30, 2000 increased
$3,660,916 or 70% from that for the corresponding previous quarter ended
November 30, 1999. Notwithstanding this significant increase in consolidated net
revenues, there were a number of significant increases and decreases in the
component net revenue categories. For instance, net revenue attributable to
Doctors Practice Management, Inc. ("DPMI") increased significantly by $199,087
or 40% from the corresponding previous quarter, primarily derived from increased
management fee of physicians under management. Net revenue attributable to Vista
operations significantly increased by $1,492,854 or 49% from the corresponding
previous quarter due to increased in patient referral. Net revenue attributable
to the Hospital significantly increased by $1,924,046 or 127% from the
corresponding previous quarter. Net revenue attributable to infusion therapy
increased $29,430 from the corresponding previous quarter due to slightly higher
patient load. Net revenue attributable to the Company's new subsidiary, Vista
Land and Equipment, L.L.C. ("VLE") increased by $15,149 which did not exist in
the corresponding previous quarter.
Consolidated costs of sale for the three months ended November 30, 2000
increased $53,671 or 43% from that for the corresponding previous quarter ended
November 30, 1999 was primarily attributable to the increased Vista operations.
Consolidated operating expenses for the three months ended November 30, 2000
increased $845,351 or 23% from that for the corresponding previous quarter ended
November 30, 1999 primarily due to increase in activities of Vista and the
Hospital. The significant increases and decreases in the component expense
categories of the consolidated operating expenses are explained as follows:
(1) The increase in compensation and benefits of $117,183 or 12% was primarily
attributable to the Hospital, Vista and DPMI operations due to the increase
in their activities.
(2) The increase in medical supplies expense of $287,508 or 34% was primarily
attributable to the Hospital and Vista operations due to the increase in
their activities.
5
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(3) The increase in other general and administrative expense of $439,438 or 43%
was primarily attributable to the Hospital, Vista and DPMI operations due to
the increase in their activities.
(4) The increase in rent and occupancy expense of $94,083 or 116% was primarily
due to accrual of increased property taxes due to increase in improvements
value.
Net Income increased $1,502,907 or 173% from $869,212 in the corresponding
quarter of the previous fiscal year to $2,372,119 in the current quarter.
Basic Earnings per common share increased $0.22 per share or 169% from $0.13 per
share in the corresponding quarter of the previous fiscal year to $0.35 per
share in the current quarter.
Diluted Earnings per common share increased $0.20 per share or 154% from $0.13
per share in the corresponding quarter of the previous fiscal year to $0.33 per
share in the current quarter.
FINANCIAL CONDITION
COMPARISON OF THE BALANCE SHEET AT THREE MONTHS ENDED NOVEMBER 30, 2000
TO THE AUDITED BALANCE SHEET AT FISCAL YEAR ENDED AUGUST 31, 2000.
Consolidated cash and cash equivalents for the three months ended November 30,
2000 increased $1,913,678 or 44% from that of the previous audited balance sheet
ending August 31, 2000 was due to $2,055,433 provided by operating activities,
$50,341 used by investing activities and $91,414 used by financing activities.
Consolidated accounts receivable for the three months ended November 30, 2000
increased $1,740,098 or 21% from that of the previous audited balance sheet
ended August 31, 2000.
Liquidity and Capital Resources
Working Capital of $10,360,970 at November 30, 2000 increased $2,923,283 or 39%
from working capital at August 31, 2000 primarily due to increases in cash and
cash equivalents and accounts receivable, decreases in accounts payable, accrued
liabilities and current maturities of long-term debt, and an increase in income
taxes payable. At November 30, 2000, the Company maintained a liquid position
evidenced by a current ratio of 2.63 to 1 and total debt to equity of 0.44 to 1.
Management believes that available cash funds and funds generated from
operations will be sufficient for the Company to finance working capital
requirements for the foreseeable future and to meet its payment obligations on
its long-term indebtedness.
Segment and related information
The Company has five reportable segments (four in fiscal 1999): clinic and
outpatient surgical center, emergency and inpatient surgical center, property
and equipment holding, which was added in fiscal 2000, physician practice and
infusion therapy. The clinic and outpatient surgical center segment provides
outpatient surgical facilities, x-ray diagnostic services and laboratory
testing. The emergency and inpatient surgical center segment is comprised of a
forty-two bed hospital which provides a wide range of medical services including
major surgical cases which require hospitalization. The property and equipment
holding segment has acquired all of the fixed assets of the clinic and
outpatient surgical center segment and the emergency and inpatient surgical
center segment. The physician practice management segment provides office space
and fee-based management services to physicians. The infusion therapy segment's
business principally involves the administration of physician-prescribed
nutrients, antibiotics or other medicines to cancer patients in their homes.
The Compny's reporting segments are business units that offer different
services. They are managed separately because each business requires different
technology, marketing strategies and performance evaluations.
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Summarized financial information concerning the Company's reportable segments is
shown in the following table for the three months ended November 30.
<TABLE>
<CAPTION>
Physician Emergency and Clinic and Property and
Infusion Practice Inpatient Outpatient Equipment
Therapy Management Surgical Center Surgical Center Holding Totals
-------- ---------- --------------- --------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
2000
Revenues-external 208,868 647,280 3,432,380 4,517,060 15,149 8,820,737
Intersegment revenues 285,000 3,784,988 - - 403,500 4,473,488
Interest revenue 44 45,775 11,890 31,607 4,423 93,739
Interest expense 34,206 - - 10,247 - 44,453
Depreciation and amort - 14,753 - - 180,767 195,520
Income tax expense 37,539 369,269 361,555 559,477 17,488 1,345,328
Segment assets 180,370 11,638,223 6,354,522 11,803,395 9,354,229 39,330,739
Expenditures-segment - 4,347 - - 45,994 50,341
Segment profit 69,715 685,786 1,114,179 1,039,028 32,477 2,941,185
1999
Revenues-external 179,482 489,404 1,515,959 3,023,817 - 5,208,662
Intersegment revenues 307,500 3,219,839 - - - 3,527,339
Interest revenue - 4,564 4,265 31,996 - 40,825
Interest expense 44,365 37,099 - 14,831 - 96,295
Depreciation and amort 157,723 35,641 - 42,749 - 236,113
Income tax expense 12,025 336,361 52,849 124,412 - 525,647
Segment assets 6,253,499 4,654,742 3,400,483 7,003,302 - 21,312,026
Expenditures-segment 5,196,908 - - 76,871 - 5,273,779
Segment profit 11,683 652,937 110,445 241,504 - 1,016,569
</TABLE>
The following table provides a reconciliation of the reportable segments'
revenues, profit, assets, and other significant items to the consolidated
totals as of November 30 and for the three months ended November 30.
2000 1999
---- ----
REVENUES:
---------
Total revenues for reportable segments 8,820,737 5,208,662
Interest income 93,739 40,825
Elimination of rent and other income (9,948) (5,875)
--------- ---------
Consolidated total revenues 8,904,528 5,243,612
PROFIT:
-------
Total profit for reportable segments 2,941,185 1,016,569
Elimination of intersegment income (13,092) (30,689)
Elimination of minority interests (555,974) (116,668)
--------- ---------
Consolidated net income 2,372,119 869,212
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ASSETS:
-------
Total assets for reportable segments 39,330,739 21,312,026
Elimination of intercompany accounts
and other (12,670,009) (4,755,421)
----------- ----------
Consolidated total assets 26,660,730 16,556,605
OTHER SIGNIFICANT ITEMS:
------------------------
Interest expense 44,453 96,295
Elimination of intersegment expense (27,392) (31,610)
----------- ----------
Consolidated interest expense 17,061 64,685
The Company's revenues and long-lived assets are derived and domiciled from a
customer base solely in the United States.
Inflation. Inflation has not significantly impacted the Company's financial
position or operations.
Forward-Looking Information. Information in this Form 10-QSB contains forward-
looking statements and information relating to the Company that are based on the
beliefs of the Company's management, as well as assumptions made by, and
information currently available to the Company's management. When used in this
Form 10-QSB, words such as "anticipate", "believe", "estimate", "expect",
"intend", "will", "will be" and similar expressions, as they related to the
Company or the Company's management, identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events, and are subject to certain risks, uncertainties, and assumptions
relating to the operations and results of operations of the Company, competitive
factors and pricing pressures, costs of products and services, general economic
conditions, and the acts of third parties, as well as other factors described in
this Form 10-QSB, and, from time to time, in the Company's periodic earnings
releases and other reports filed with the Securities and Exchange Commission.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results or outcomes may vary
materially from those described herein as anticipated, believed, estimated,
intended, or will be or the like.
PART II.
ITEM 1. - LEGAL PROCEEDINGS
The Company is not a party to any material litigation.
ITEM 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. - DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. - OTHER INFORMATION
During October, 2000, an employee exercised 15,523 option common
shares at $1.87 per share.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DYNACQ INTERNATIONAL, INC.
DATE: January 14, 2001 BY: /s/ Philip Chan
------------------------------------
Philip Chan
Vice President-Finance/Treasurer and
Chief Financial Officer
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