<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
FORM 10-Q
[ X ] Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
[ ] Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _________ to ____
Commission File Number 0-21758
-------------------------------------
DIAGNOSTIC HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2960048
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2777 Stemmons Freeway, Suite 1525, Dallas, Texas 75207
(Address of principal executive offices, including zip code)
(214)634-0403
(Registrant's telephone number, including area code)
-------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
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
-------- --------
Applicable only to issuers involved in bankruptcy proceedings
During the past five years.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
------ ------
As of June 30, 1998, there were 11,637,492 issued and 11,404,233 shares
outstanding of Registrant's common stock, $.001 par value.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
INDEX
PART I. Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheets 2-3
June 30, 1998 and December 31, 1997
Consolidated Statements of Operations
Six months ended June 30, 1998 and 1997 4
Consolidated Statements of Operations
Three months ended June 30, 1998 and 1997 5
Consolidated Statement of Stockholders' Equity
June 30, 1998 6
Consolidated Statements of Cash Flows
Six months ended June 30, 1998 and 1997 7
Consolidated Statements of Cash Flows
Three months ended June 30, 1998 and 1997 8
Notes to Consolidated Financial Statements 9-13
Item 2. Management's Discussion and Analysis or
Plan of Operation 14-18
PART II. Other Information 19
Signatures 20
Item 6. Exhibits and Reports on Form 8-K 21
Exhibit 11 - Statement re: computation of per share earnings 22
Exhibit 27 - Financial Data Schedule (EDGAR filing only)
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,731,972 $ 5,126,114
Accounts receivable: Trade, net of
allowance for doubtful accounts 14,878,931 17,294,128
Accrued interest and other 768,353 793,369
Contract receivables - current 4,332,271 2,167,265
Federal income tax receivable 301,156 --
Deferred federal income taxes 138,592 87,876
Prepaid expenses and other 1,195,339 1,528,931
------------- -------------
Total Current Assets 27,346,614 26,997,683
------------- -------------
PROPERTY & EQUIPMENT:
Office furniture & equipment 2,184,385 2,015,749
Machinery & service equipment 31,048,415 35,286,844
Leasehold improvements 1,639,898 273,968
Less: Accumulated depreciation and amortization (10,214,699) (8,876,887)
------------- -------------
TOTAL PROPERTY & EQUIPMENT 24,657,999 28,699,674
------------- -------------
OTHER ASSETS:
Deposits and other assets 3,026,772 2,999,701
Deferred acquisition costs 3,671 122,536
Contract receivables - long-term 13,065,823 10,058,674
Equity in unconsolidated partnership 1,428,069 --
Goodwill 41,055,505 38,793,903
Noncompete agreements 3,450,270 3,428,270
Less: Accumulated amortization (4,529,405) (3,240,266)
------------- -------------
Total Other Assets 57,500,705 52,156,818
------------- -------------
TOTAL ASSETS $ 109,505,318 $ 107,854,175
============= =============
</TABLE>
2
<PAGE>
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,840,628 $ 2,626,978
Accrued liabilities 3,349,080 3,774,969
Current lease obligations 4,327,492 4,663,279
Current portion of long-term debt 1,530,522 1,485,113
Deferred liability -- 2,362,554
Notes payable -- 1,500,000
Current income taxes -- 1,363,543
------------- -------------
Total Current Liabilities 11,047,722 17,776,436
Long-term lease obligations 8,953,397 10,348,496
Long-term debt 6,582,756 4,961,570
Senior subordinated debt 20,000,000 20,000,000
Deferred rent 145,880 149,253
Other liabilities 5,253,769 2,647,277
Deferred income taxes 2,018,480 2,018,480
------------- -------------
Total Liabilities 54,002,004 57,901,512
------------- -------------
Stockholders' Equity:
Common stock, $.001 par value, authorized
15,000,000 shares; issued 11,637,492 and
10,718,867 shares and outstanding 11,404,233
and 10,485,608 shares at June 30, 1998 and
December 31, 1997, respectively 11,637 10,719
Preferred stock, $.001 par value; authorized
3,000,000 shares; issued and outstanding
695,593 shares at June 30, 1998 and at
December 31, 1997; $4,869,154
liquidation preference 696 696
Additional paid-in capital 48,369,215 42,151,656
Retained earnings 7,332,917 8,000,743
Stockholder receivable (103,500) (103,500)
Treasury stock (at cost) (107,651) (107,651)
------------- -------------
Total Stockholders' Equity 55,503,314 49,952,663
------------- -------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 109,505,318 $ 107,854,175
============= =============
</TABLE>
3
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
REVENUES:
Gross revenues $ 29,568,383 $ 23,042,652
------------ ------------
EXPENSES:
General & administrative 1,680,392 986,890
Salaries & employee benefits 13,024,569 10,493,117
Legal & professional 193,815 113,154
Rent & utilities 755,296 515,108
Taxes & insurance 593,475 215,986
Technical operating expenses 3,129,276 3,062,121
Provision for doubtful accounts 257,775 275,519
Depreciation and amortization 3,494,443 2,590,231
Restructuring and impairment expense 5,518,489 --
------------ ------------
TOTAL OPERATING EXPENSES 28,647,530 18,252,126
------------ ------------
Equity in earnings of
unconsolidated partnership 179,843 --
------------ ------------
INCOME FROM OPERATIONS 1,100,696 4,790,526
OTHER INCOME (EXPENSE):
Other income 92,292 224,333
Interest expense (2,175,206) (1,404,206)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (2,082,914) (1,179,873)
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (982,218) 3,610,653
PROVISION (BENEFIT) FOR FEDERAL INCOME TAXES (314,392) 1,227,622
------------ ------------
NET INCOME (LOSS) $ (667,826) $ 2,383,031
============ ============
EARNINGS (LOSS) PER SHARE :
Basic $ (0.19) $ 0.26
============ ============
Diluted $ -- $ 0.22
============ ============
Weighted average common shares outstanding:
Basic 11,056,601 9,178,834
============ ============
Diluted 12,605,891 11,044,017
============ ============
</TABLE>
4
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
REVENUES:
Gross revenues $ 15,153,993 $ 12,532,676
------------ ------------
EXPENSES:
General & administrative 870,147 439,616
Salaries & employee benefits 6,533,712 5,444,905
Legal & professional 133,725 62,147
Rent & utilities 387,388 315,836
Taxes & insurance 322,403 109,725
Technical operating expenses 1,818,406 1,632,034
Provision for doubtful accounts 113,631 173,778
Depreciation and amortization 1,570,266 1,428,099
Restructuring and impairment expense 5,518,489 --
------------ ------------
TOTAL OPERATING EXPENSES 17,268,167 9,606,140
------------ ------------
Equity in earnings of
unconsolidated partnership 94,168 --
------------ ------------
INCOME (LOSS) FROM OPERATIONS (2,020,006) 2,926,536
OTHER INCOME (EXPENSE):
Other income 39,159 150,455
Interest expense (1,160,868) (1,012,750)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (1,121,709) (862,295)
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (3,141,715) 2,064,241
PROVISION (BENEFIT) FOR FEDERAL INCOME TAXES (1,005,430) 701,842
------------ ------------
NET INCOME (LOSS) $ (2,136,285) $ 1,362,399
============ ============
EARNINGS (LOSS) PER SHARE :
Basic $ (0.19) $ 0.14
============ ============
Diluted $ -- $ 0.12
============ ============
Weighted average common shares outstanding:
Basic 10,761,768 9,647,231
============ ============
Diluted 12,366,956 11,512,414
============ ============
</TABLE>
5
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Consolidated Statement of Stockholders' Equity (Unaudited)
For the Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Additional
Common Preferred Paid-in Retained Stockholder Treasury
Stock Stock Capital Earnings Receivable Stock Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 $10,719 $696 $42,151,656 $8,000,743 ($103,500) ($107,651) $49,952,663
Net income (667,826) (667,826)
Warrants exercised 251 2,189,480 2,189,731
Conversion of deferred liability 200 1,499,800 1,500,000
Shares issued in connection
with the following acquisitions:
ICM 36 289,178 289,214
Sonomed 15 169,985 170,000
Chula Vista Partnership 127 1,606,404 1,606,531
DRMU 13 124,987 125,000
Stock options exercised 276 337,725 338,001
-----------------------------------------------------------------------------------------------
Balance, June 30, 1998 $11,637 $696 $48,369,215 $7,332,917 ($103,500) ($107,651) $55,503,314
===============================================================================================
</TABLE>
6
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income (loss) $ (667,826) $ 2,383,031
Adjustments to Reconcile Net Income to
Net Cash Provided by Operations:
Depreciation and amortization 3,494,443 2,590,231
Deferred federal income taxes (50,716) --
Decrease in deferred rent expense (3,373) (2,799)
Foreign currency translation adjustments -- 2,333
Restructuring and impairment expense 4,593,808 --
(Increase) decrease in trade receivable 1,601,800 (3,904,982)
Increase in contracts receivable (5,172,155) (1,034,505)
Increase in prepaid expenses (237,110) (624,779)
Increase in other assets (128,336) (1,775,515)
Increase in equity in unconsolidated partnership (55,493) --
Increase (decrease) in accounts payable (829,040) 127,294
Increase (decrease) in accrued liabilities (427,993) 108,334
Increase (decrease) in income taxes payable (1,664,699) 1,227,622
Increase in other liabilities 1,722,124 1,623,556
------------ ------------
NET CASH PROVIDED BY OPERATIONS 2,175,434 719,821
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Decrease in cash investments -- 5,000,000
Cash payments for the purchase of property (990,254) (910,015)
Acquisition of businesses net of cash acquired (11,352) (14,357,147)
Additional subsidiary acquisition costs (175,166) (828,667)
(Increase) decrease in other receivables (30,901) 92,175
(Increase) decrease in employee receivables 58,482 (119,209)
Increase in stockholder receivable (2,565) (3,105)
------------ ------------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (1,151,756) (11,125,968)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,527,732 8,665,394
Proceeds from issuance of sr. subordinated debt -- 20,000,000
Deferred financing costs -- (745,060)
Net borrowings (payments) on line of credit 137,446 (1,572,000)
Principal payments on long-term debt (1,047,512) (4,712,664)
Principal payments on capital lease obligations (2,035,486) (1,367,552)
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (417,820) 20,268,118
------------ ------------
NET INCREASE IN CASH 605,858 9,861,971
CASH AND CASH EQUIVALENTS BALANCE,
BEGINNING OF PERIOD 5,126,114 229,547
------------ ------------
CASH AND CASH EQUIVALENTS BALANCE,
END OF PERIOD $ 5,731,972 $ 10,091,518
============ ============
</TABLE>
7
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------ ------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income (loss) $ (2,136,285) $ 1,362,399
Adjustments to Reconcile Net Income to
Net Cash Provided by Operations:
Depreciation and amortization 1,570,265 1,428,099
Deferred federal income taxes (50,716) --
Decrease in deferred rent expense (1,687) (1,687)
Gain on disposal of assets 186 --
Foreign currency translation adjustments -- (17)
Restructuring and impairment expense 4,593,808 --
(Increase) decrease in trade receivable 346,922 (3,639,038)
Increase in contracts receivable (4,186,671) (623,072)
(Increase) decrease in prepaid expenses (329,869) 56,634
(Increase) decrease in other assets 315,671 (669,463)
Decrease in equity in unconsolidated partnership 30,182 --
Increase (decrease) in accounts payable 405,263 (37,546)
Increase (decrease) in accrued liabilities 1,397,603 (4,980,004)
Increase (decrease) in income taxes payable (1,955,738) 701,842
Increase in other liabilities 1,626,901 1,008,786
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATIONS 1,625,835 (5,393,067)
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Cash payments for the purchase of property (473,346) (560,229)
Acquisition of businesses net of cash acquired (6,880) --
Additional subsidiary acquisition costs (83,425) (679,715)
Increase in other receivables (68,116) (45,681)
Increase in employee receivables (6,476) (80,092)
Increase in stockholder receivable (472) (1,553)
------------ ------------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (638,715) (1,367,270)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 338,001 2,825
Net payments on line of credit -- (2,287,000)
Proceeds from issuance of sr. subordinated debt -- 20,000,000
Deferred finance costs -- (745,060)
Principal payments on long-term debt (423,285) (8,110,504)
Principal payments on capital lease obligations (833,878) (876,397)
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (919,162) 7,983,864
------------ ------------
NET INCREASE IN CASH 67,958 1,223,527
CASH AND CASH EQUIVALENTS BALANCE,
BEGINNING OF PERIOD 5,664,014 8,867,991
------------ ------------
CASH AND CASH EQUIVALENTS BALANCE,
END OF PERIOD $ 5,731,972 $ 10,091,518
============ ============
</TABLE>
8
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
NOTE 1. GENERAL
The unaudited consolidated financial statements included herein for Diagnostic
Health Services, Inc. and subsidiaries ("DHS" or the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission and include all adjustments which are, in the opinion of management,
necessary for a fair presentation. Certain information and footnote disclosures
required by generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. Certain 1997 balances have been
reclassified to conform to the 1998 presentation. These financial statements
include the accounts of the Company and its subsidiaries, which are set forth in
the following table.
[ORGANIZATION CHART APPEARS HERE]
In addition, DHS and DHSMS have two inactive wholly-owned subsidiaries,
Diagnostic Health Services de Mexico, S.A. de C.V and HomeCare International,
Inc.
The Company is a leading outsource provider of medical services to hospitals,
physicians' offices and other healthcare facilities in the Midwest, West and
South Central United States. DHS primarily provides radiology and cardiology
diagnostic services and equipment, as well as departmental management services,
to healthcare facilities on an in-house and shared basis.
9
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
NOTE 2. WARRANTS
On February 14, 1997, the SEC declared effective the Company's Form S-3
Registration Statement relating to an offering of 1,791,150 Warrant Shares,
which are issuable upon exercise, at prices ranging from $5.48 to $7.50 per
share, of (i) 1,375,000 Redeemable Common Stock Purchase Warrants (the "Public
Warrants") issued in connection with the company's 1993 initial public offering
(the "IPO"), (ii) 316,150 underwriter warrants issued in connection with the IPO
(the "Underwriters' Warrants"), and (iii) 100,000 warrants issued in connection
with DHS's equity private placement in April 1996 (the "Bridge Warrants") of
which 2,500 had been exercised prior to the effectiveness of the registration.
On February 18, 1997, the Company called all of the Public Warrants for
redemption.
On April 17, 1997, the Company issued 60,000 common stock purchase warrants to
Prudential Insurance Company of America in connection with the sale of
$20,000,000 in principal amount of senior subordinated promissory notes. As of
June 30, 1998, no warrants under this agreement had been exercised. At June 30,
1998, stock warrants outstanding amounted to 108,514 at exercise prices ranging
from $5.48 to $12.25 per common share.
NOTE 3. ACQUISITIONS
In January 1997, the Company, through its Heart Institute of Tulsa, Inc.
subsidiary ("HIT"), acquired Ultrasound Diagnostic Services, Ltd. ("UDS"), an
Arizona-based provider of non-invasive diagnostic ultrasound testing services.
The consideration paid for UDS consisted of 86,520 shares of DHS's common stock
and a $400,000 cash payment to the former stockholders of UDS.
On March 21, 1997 (effective as of March 1, 1997), the Company, through its
second-tier wholly-owned subsidiary, SoCal Diagnostic Services, Inc. ("SoCal"),
purchased substantially all of the operating assets (exclusive of cash) of the
ultrasound division of Diagnostic Imaging Services, Inc. ("DIS"), which business
consists primarily of providing hospital-based and mobile non-invasive
ultrasound and other diagnostic testing services to the acute and post-acute
care industry and primary care physicians in the greater Los Angeles and San
Diego, California metropolitan areas and in counties adjacent thereto. The
purchase included $6,519,475 of various assets (including goodwill), including
approximately $2,579,158 of equipment, furniture and fixtures, $8,590 of
security deposits, and $3,931,721 of goodwill. The purchase price paid to DIS
was $6,519,475 (subject to post-closing adjustment), which was paid entirely in
cash. In addition, SoCal assumed capital lease obligations, financing
agreements and other commitments in respect of fixed assets in the aggregate
principal amount of $1,519,261. The Company also agreed that it would,
subsequent to the closing, in the event of certain business developments, issue
certain common stock purchase warrants to DIS, and the Company and SoCal
obtained a 10-year non-competition agreement from DIS in consideration of the
cash sum of $1,000,000 paid to DIS and its ultimate corporate parent at the time
of closing.
On April 17,1997 (effective March 1, 1997), SoCal acquired all of the issued and
outstanding capital stock of DIS (which, together with its wholly-owned
subsidiaries, Diagnostic Imaging Services, Inc. I and Santa Monica Imaging
Center Limited Partnership, are collectively referred to herein as the "DIS
Companies"), whose business consists primarily of the ownership and operation of
four (4) hospital-based magnetic resonance imaging (MRI) centers located in
southern California. The purchase price for the stock of DIS was $9,083,865
(subject to post-closing adjustment), of which $7,583,865 was paid in cash, and
the remaining $1,500,000 was payable either in cash or (at the seller's
option) in common stock of the Company (valued at $7.615 per share) in three
equal annual installments of $500,000 each on April 17 of each of 1998, 1999 and
2000. On April 8, 1998, all three of the annual installments were paid by the
issuance of a total of 200,000 DHS common shares. In addition, the DIS Companies
were acquired subject to capital lease obligations, financing agreements and
other commitments in respect of fixed assets of the business in the aggregate
principal amount of $6,046,755.
10
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
NOTE 3 - ACQUISITIONS (Continued)
The funds utilized to pay the cash portion of the purchase price in the second
DIS transaction were obtained through the simultaneous issuance and sale by the
Company to The Prudential Insurance Company of America ("Prudential") of
$20,000,000 in principal amount of senior subordinated promissory notes of the
Company (the "Notes"). The Notes bear interest at a fixed rate of 10.5% per
annum (payable quarterly), and mature as to principal in equal one-third
installments on April 17 of each of 2003, 2004 and 2005. The Notes may be
prepaid at the Company's option (subject to certain "make-whole" prepayment
premiums in respect of the remaining stated term of the Notes), and the Company
may be required (at the Noteholders' option) to purchase the Notes in the event
of a change in control of the Company. In addition to application to the
payment of the cash portion of the purchase price for the stock of DIS, the net
proceeds from the issuance and sale of the Notes were utilized to repay
$5,500,000 in borrowings obtained under the Company's senior credit facilities
with Texas Commerce Bank National Association (the "Bank") (utilized in
connection with the Company's March 1997 acquisition of the ultrasound business
of DIS), and for short-term investments pending other use of such net proceeds.
In connection with the issuance of the Notes, the Company paid Prudential a fee
in the amount of $54,590, and issued to Prudential a five-year redeemable common
stock purchase warrant (with piggyback registration rights) for 60,000 shares of
common stock of the Company at an exercise price of $12.25 per share. In
addition, the Company paid to Prudential Securities, Inc. (as placement agent) a
fee in the amount of $690,470.
Effective as of October 17, 1997, HIT acquired CardioVision, Inc. ("CVI"), a Las
Vegas, Nevada-based provider of non-invasive diagnostic ultrasound testing
services. The consideration paid for CVI consisted of 29,728 shares of DHS
common stock and a $340,000 cash payment to the former stockholders of CVI.
On November 19, 1997, SoCal acquired the assets and business of Valley
Diagnostic Services ("Valley"), a proprietorship providing mobile diagnostic
ultrasound testing services in southern California. The consideration paid by
SoCal in this transaction consisted of 13,309 shares of DHS common stock and a
$100,000 cash payment to the former owner of Valley.
Effective as of December 2, 1997, HIT acquired Medical Diagnostic Imaging, Inc.
("MDII"), a Huntsville, Alabama-based provider of non-invasive diagnostic
ultrasound testing services. The consideration for MDII consisted of 100,524
shares of DHS common stock and a $900,000 cash payment to the former
stockholders of MDII.
Effective as of December 9, 1997, SoCal acquired Mobil Diagnostics, Inc.
("Mobil"), a southern California-based provider of mobile non-invasive
diagnostic ultrasound testing services. The consideration for Mobil consisted
of 39,720 shares of DHS common stock and a cash payment of $150,000 to the
former stockholder of Mobil. In addition, SoCal agreed to cause DHS to issue
certain additional shares of DHS common stock to the former stockholder within
15 days after the first anniversary of the closing date, and to make cash
payments to the former stockholder of $50,000 and $28,000, respectively, within
15 days after the first and second anniversaries of the closing date.
11
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
NOTE 3 - ACQUISITIONS (Continued)
Effective as of December 30, 1997, the Company's second-tier wholly-owned
subsidiary Mobile Diagnostic Systems, Inc. ("MDS") acquired Medical Ancillary
Services, Inc. ("MASI"), a Fort Worth-based provider of non-invasive diagnostic
ultrasound and nuclear imaging testing services. The consideration paid for
MASI consisted of 53,582 shares of DHS common stock and a cash payment of
$384,000 to the former stockholders of MASI.
Effective as of January 30, 1998, MDS acquired International Cardiac Monitoring,
Inc. ("ICM"), a Houston-based provider of medical testing and monitoring
services. The consideration paid for ICM consisted of 26,946 shares of DHS
common stock.
On February 26, 1998, SoCal acquired from Diagnostic Imaging Services, Inc., a
Delaware corporation ("DIS-Delaware"), one-half of the outstanding general
partnership interests and one-half of the outstanding limited partnership
interests in Scripps Chula Vista Imaging Center, L.P. ("SCVIC"), whose business
consists of the operations of a magnetic resonance imaging center on the campus
of Scripps Hospital in Chula Vista, California. The consideration paid for such
partnership interests consisted of 127,250 shares of DHS common stock, which,
together with certain additional shares issued in satisfaction of the
post-closing payment obligations under the April 17, 1997 transaction relating
to DIS, were subsequently registered pursuant to a registration statement on
Form S-3.
Effective as of March 2, 1998, the Company acquired Sonomed, Inc. ("Sonomed"), a
Birmingham, Alabama-based provider of non-invasive diagnostic ultrasound testing
services. The consideration paid for Sonomed consisted of 14,571 shares of DHS
common stock and a cash payment of $30,000 to the former stockholder of Sonomed.
On May 11, 1998, the Company acquired Diagnostic Radiology Mobile Ultrasound,
Inc. ("DRMU"), an Edmond, Oklahoma-based provider of non-invasive diagnostic
ultrasound testing services. The consideration paid to the former owners of
DRMU consisted of 13,484 shares of DHS common stock.
On May 22, 1998, the Company purchased the assets of the ultrasound business
segment of Advanced Respiratory Care Services, Inc. ("ARCS"), which provides
non-invasive diagnostic ultrasound testing services in Abilene, Texas and
Nashville, Tennessee. The consideration paid to ARCS consisted of a cash
payment of $13,556.
In May 1998, the Company announced the execution of a letter of intent to
acquire the southwestern operations of WorldCare Imaging, Inc. ("WCI"), for
which closing was subject to the completion of the Company's due diligence
review and definitive documents. Upon conclusion of due diligence, the Company
elected not to go forward with the transaction.
12
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
NOTE 4. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for the six months ended June 30, 1998 and 1997 for interest was
approximately $1,748,000 and $977,000, respectively.
The Company paid $400,000 in cash for income tax payments for the six months
ended June 30, 1998. No cash payments for income taxes were made for the six
months ended June 30, 1997.
The Company acquired assets in exchange for the issuance of common stock and the
assumption of various liabilities in connection with the acquired businesses.
Cash and noncash investing and financing activities related to the acquisitions
through June 30, consisted of the following:
1998 1997
------------ ------------
Assets acquired $ 960,768 $ 24,536,692
Liabilities assumed (332,997) (9,343,352)
Common stock issued (584,214) (690,000)
------------ ------------
Total cash paid 43,577 14,503,340
Fees and expenses - -
Less cash acquired (32,205) (146,192)
------------ ------------
Net cash paid $ 11,352 $ 14,357,148
============ ============
The Company also recognized assets and obligations under noncompete agreements
of approximately $22,000 and approximately $2,160,000 for the six months ended
June 30, 1998 and 1997, respectively.
The Company acquired property and equipment under capital leases, excluding
leases in connection with business acquisitions, of approximately $212,000 and
approximately $2,866,000 for the six months ended June 30, 1998 and 1997,
respectively.
During the six months ended June 30, 1998, the Company made an adjustment of
approximately $1,753,000 to goodwill, related with the SoCal and ICM
acquisitions, due to the revaluation of property and equipment acquired. No
material adjustments to goodwill were made during the six months ended June 30,
1997.
During the six months ended June 30, 1998, the Company converted $1,500,000 of
deferred liabilities related to the DIS acquisition by the issuance of 200,000
DHS common shares. No conversion of liabilities to DHS common shares occurred
during the six months ended June 30, 1997.
NOTE 5. RESTRUCTURING AND IMPAIRMENT OF ASSETS
During the second quarter of 1998, the Company commenced a restructuring of
certain of its operations and recorded a restructuring and impairment charge of
approximately $5,518,000. The restructuring and impairment charge relates to a
reduction in staff ($684,000), the write-down of partially impaired assets
(principally acquired equipment) to their fair market value ($3,246,000), the
write-off of accounts receivable acquired through acquisition ($982,000); and
divisional office closings and other ($606,000). After the related income tax
benefit of approximately $1,766,000, this charge reduced fiscal year 1998
earnings by approximately $3,752,000.
13
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Item 2. Management's Discussion and Analysis or Plan of Operations
RESULTS OF OPERATIONS
The following table sets forth operating data of the Company as a percentage of
net sales for the periods indicated:
Three Months Ended
June 30,
-----------------
1998 1997
------ -------
Gross revenues 100.0 % 100.0 %
Operating expenses 113.9 76.6
Equity in earnings of unconsolidated partnership 0.6 -
------ ------
Income (loss) from operations (13.3) 23.4
Interest expense 7.7 8.1
Other expense (income) (0.3) (1.2)
------ ------
Income (loss) before provision for income taxes (20.7) 16.5
Provision (benefit) for federal income taxes (6.6) 5.6
------ ------
Net income (loss) (14.1)% 10.9 %
====== ======
Three Months Ended June 30, 1998 Compared with Three Months Ended June 30, 1997
Gross revenues increased by 20.9% to approximately $15,154,000 for the three
months ended June 30, 1998 from approximately $12,533,000 for the three months
ended June 30, 1997. Excluding revenues attributable to acquired businesses,
gross revenues increased by 8.3% to approximately $13,576,000 for the three
months ended June 30, 1998 from approximately $12,533,000 for the three months
ended June 30, 1997.
Operating expenses increased by 79.7% to approximately $17,268,000 for the three
months ended June 30, 1998 from approximately $9,606,000 for the three months
ended June 30, 1997, due primarily to a restructuring and impairment charge of
approximately $5,518,000, and to the Company's expanded operations through its
acquisitions. The restructuring and impairment charge relates to a reduction in
staff ($684,000), the write-down of partially impaired assets (principally
acquired equipment) to their fair market value ($3,246,000), the write-off of
accounts receivable acquired through acquisition ($982,000); and divisional
office closings and other ($606,000). As a percentage of gross revenues, total
operating expenses increased to 113.9% for the three months ended June 30, 1998
from 76.6% for the three months ended June 30, 1997. This increase is
attributable primarily to the restructuring and impairment charge and to an
increase in general and administrative expenses associated with additional
travel expenses as a direct result of an increase in sales personnel in the last
quarter of 1997. Operating expenses, excluding the restructuring and impairment
expense, increased by 22.3% to approximately 11,750,000 for the three months
ended June 30, 1998. As a percentage of gross revenues, operating expenses,
excluding the restructuring and impairment expense, increased to 77.5% for the
three months ended June 30, 1998.
Income from operations decreased by 169.0% to a loss of approximately $2,020,000
for the three months ended June 30, 1998 from income of approximately $2,926,000
for the three months ended June 30, 1997. This decrease is due primarily to the
restructuring and impairment expense. As a percentage of gross revenues, income
from operations decreased to (13.3)% for the three months ended June 30, 1998
from 23.3% in the comparable prior year period. Income from operations,
excluding the restructuring and impairment expense, increased by 19.5% to
approximately 3,498,000 for the three months ended June 30, 1998. As a
percentage of gross revenues, income from operations, excluding the
restructuring and impairment expense, decreased to 23.1% for the three months
ended June 30, 1998.
14
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Interest expense increased by 14.6% to approximately $1,161,000 for the three
months ended June 30, 1998 from approximately $1,013,000 for the three months
ended June 30, 1997. This increase was attributable primarily to the $20,000,000
in subordinated debt obligations incurred in connection with the Company's 1997
acquisitions from DIS, and new debt obligations acquired in connection with
those and other business acquisitions. As a percentage of gross revenues,
interest expense decreased to 7.7% for the three months ended June 30, 1998 from
8.1% for the three months ended June 30, 1997.
Other income is primarily gain realized upon disposition of equipment at the end
of its lease term, and interest earned on liquid investments.
Net income decreased by 256.8% to a net loss of approximately $2,136,000 for the
three months ended June 30, 1998 from net income of approximately $1,362,000 for
the comparable prior year period. This decrease is due primarily to the
restructuring and impairment expense, net of the related income tax benefit. Net
income, excluding the restructuring and impairment expense (net of the related
tax effect) of approximately $3,753,000, increased by 18.7% to approximately
$1,617,000.
Six Months Ended June 30, 1998 Compared with Six Months Ended June 30, 1997
The following table sets forth operating data of the Company as a percentage of
net sales for the periods indicated:
Six Months Ended
June 30,
------------------
1998 1997
------ ------
Gross revenues 100.0 % 100.0 %
Operating expenses 96.9 79.2
Equity in earnings of unconsolidated partnership 0.6 -
------ ------
Income from operations 3.7 20.8
Interest expense 7.3 6.1
Other expense (income) (0.3) (0.9)
------ ------
Income (loss) before provision for income taxes (3.3) 15.6
Provision (benefit) for federal income taxes (1.1) 5.3
------ ------
Net income (loss) (2.2)% 10.3 %
====== ======
Gross revenues increased by 28.3% to approximately $29,568,000 for the six
months ended June 30, 1998 from approximately $23,043,000 for the six months
ended June 30, 1997. Excluding revenues attributable to acquired businesses,
gross revenues increased by 8.0% to approximately $24,884,000 for the six months
ended June 30, 1998 from approximately $23,043,000 for the six months ended June
30, 1997.
Operating expenses increased by 56.9% to approximately $28,648,000 for the six
months ended June 30, 1998 from approximately $18,252,000 for the six months
ended June 30, 1997, due primarily to a restructuring and impairment charge of
approximately $5,518,000, and to the Company's expanded operations through its
acquisitions. The restructuring and impairment charge relates to a reduction in
staff ($684,000), the write-down of partially impaired assets (principally
acquired equipment) to their fair market value ($3,246,000), the write-off of
accounts receivable acquired through acquisition ($982,000); and divisional
office closings and other ($606,000). As a percentage of gross revenues, total
operating expenses increased to 96.9% for the six months ended June 30, 1998
from 79.2% for the six months ended June 30, 1997. This increase is
attributable primarily to the restructuring and impairment expense and by
additional general and administrative expenses in the second quarter as
described above, offset in part by the efficient utilization of personnel and
resources, and absorption of fixed costs over a broader revenue base, resulting
from the Company's integration of acquired businesses, and by an increase in the
number of in-house contracts for the provision of radiology and cardiology
services. These contracts typically generate higher profit margins than the
other services provided by the Company.
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Income from operations decreased by 77.0% to approximately $1,101,000 for the
six months ended June 30, 1998 from approximately $4,791,000 for the six months
ended June 30, 1997. This decrease is due primarily to the restructuring and
impairment expense. As a percentage of gross revenues, income from operations
decreased to 3.7% for the six months ended June 30, 1998 from 20.8% in the
comparable prior year period. This decrease is due primarily to the
restructuring and impairment expense. Income from operations, excluding the
restructuring and impairment expense, increased by 38.2% to approximately
6,619,000 for the six months ended June 30, 1998. As a percentage of gross
revenues, income from operations, excluding the restructuring and impairment
expense, increased to 22.4% for the six months ended June 30, 1998.
Interest expense increased by 54.9% to approximately $2,175,000 for the six
months ended June 30, 1998 from approximately $1,404,000 for the six months
ended June 30, 1997. This increase was attributable primarily to the $20,000,000
in subordinated debt obligations incurred in connection with the Company's 1997
acquisitions from DIS, and new debt obligations acquired in connection with
those and other business acquisitions. As a percentage of gross revenues,
interest expense increased to 7.3% for the six months ended June 30, 1998 from
6.1% for the six months ended June 30, 1997.
Other income is primarily gain realized upon disposition of equipment at the end
of its lease term, and interest earned on liquid investments.
Net income decreased by 128.0% to a loss of approximately $668,000 for the six
months ended June 30, 1998 from income of approximately $2,383,000 for the
comparable prior year period. This decrease is due primarily to the
restructuring and impairment expense, net of the related income tax benefit. Net
income, excluding the restructuring and impairment expense (net of the related
tax effect) of approximately $3,753,000, increased by 29.4% to approximately
$3,085,000.
16
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
In May 1998, the Company and its subsidiaries entered in to an amendment of the
revolving credit and term loan facility with Chase, providing for up to
$2,500,000 in available revolving credit (or, if less, 75% of the Company's and
its subsidiaries' eligible accounts receivable from time to time), and an
acquisition term loan facility of up to $17,500,000 in maximum principal amount.
Pursuant to the amendment, the Company rolled over the outstanding borrowings of
$2,500,000 on the revolving credit facility into the term loan facility. At June
30, 1998, the Company had no outstanding borrowings under the revolving credit
facility and $5,815,039 outstanding borrowings under the term loan facility.
These loans bear interest at varying rates, depending on the Company's relative
leverage from time to time. The Company's right to make additional borrowings
under the acquisition term loan facility will terminate on December 31, 1998. In
June 1998, the Company and its subsidiaries entered into a further amendment of
the revolving credit and term loan facility with Chase, whereby the revolving
credit facility was extended and will currently expire on June 30, 1999. At June
30, 1998, the Company had approximately $5,732,000 in cash and cash equivalents.
In connection with the amendment, Chase waived certain prior financial covenant
defaults.
On April 17, 1998, the Company filed an S-3 Registration Statement (which was
declared effective on April 24) of 501,163 shares of common stock in connection
with the proposed WCI transaction, the SCVIC transaction described in Note 3,
and the debt conversion associated with the DIS-Delaware transaction, as
described in the following paragraph. Of the 501,163 shares registered, 327,250
of these shares have been issued to DIS-Delaware, and the remaining 173,913
shares are being held in reserve.
In March 1998, DIS-Delaware agreed to convert into DHS common stock certain
deferred liabilities owed in accordance with the DIS transactions described in
Note 3; therefore, $1,500,000 of deferred liabilities were recorded as current
liabilities at March 31, 1998 and December 31, 1997. On April 8, 1998, the
deferred liabilities were converted to 200,000 DHS common shares.
In April 1997, the Company issued and sold to Prudential $20,000,000 in
principal amount of senior subordinated promissory notes (the "Subordinated
Notes"). The Subordinated Notes bear interest at a fixed rate of 10.5% per
annum, and mature as to principal in equal one-third installments on April 17 of
each of 2003, 2004 and 2005. The Subordinated Notes may be prepaid by the
Company under certain circumstances (including the requirement of certain
"make-whole" prepayment premiums), and the Company may be required (at the
option of the holders of the Subordinated Notes) to purchase the Subordinated
Notes in the event of a change in control of the Company. The Subordinated Notes
also require the Company and its subsidiaries to comply with certain financial
covenants, including limitations on certain other indebtedness.
The Company and its subsidiaries have also entered into various financing
arrangements with commercial leasing companies and equipment suppliers, bearing
interest ranging from 6% to 11% per annum.
The Company received net proceeds of approximately $1,298,000 in the three
months ended March 31, 1998 from the excise of underwriter's warrants,
approximately $8,424,000 in fiscal year 1997 from the exercise of its previously
outstanding publicly traded warrants (which were called for redemption in the
first quarter of 1997), $562,500 in fiscal year 1997 from the exercise of other
warrants, and $891,731 in the six months ended June 30, 1998 and $1,492,801
in fiscal year 1997 from the exercise of options under the Company's various
stock option plans.
Based on the Company's operating plan, management believes that available
resources and funds generated from operations will be sufficient to meet the
Company's operating requirements through the close of the Company's fiscal year
ending December 31, 1998.
17
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
EFFECTS OF INFLATION
Inflation is not a material factor affecting the Company's business. General
operating expenses such as salaries and employee benefits are, however, subject
to normal inflationary pressures.
SEASONALITY
The Company's results of operations, have, in some years, varied significantly
from quarter to quarter, for reasons particular to each quarter. For instance,
hospital admissions and doctor visits (and, therefore, the Company's imaging
revenues) are typically lower during holiday periods, and at other times when
physicians traditionally take their own vacations. Conversely, prior to the
sale of such business in the fourth quarter of 1997, revenues from the Company's
allied healthcare services business have generally increased in holiday periods,
due to increased demand for temporary personnel when regular staff is away.
TRENDS AND UNCERTAINTIES
The Company's future revenues and results of operations may be substantially
affected by proposed reforms of the nation's healthcare system and by potential
reductions in reimbursement rates and policies imposed by Medicare and other
third-party reimbursement programs (from which the Company derives a material
portion of its receipts). Continuing pressures on pricing structures applicable
to the Company's services, or inability to renew existing contracts, could have
the effect of reducing the Company's revenues and operating profit margins. The
Company is unable to predict the nature or extent of any such changes and/or the
effects thereof on the Company.
18
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Part II
OTHER INFORMATION
Items 1-5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits to this report:
Exhibit 11: Computation re: Computation of Earnings Per Share
Exhibit 27: Financial Data Schedule (EDGAR filing only)
(b) The Company did not file any reports on Form 8-K during the quarterly period
ended June 30, 1998.
19
<PAGE>
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
SIGNATURES
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
undersigned thereunto duly authorized.
DIAGNOSTIC HEALTH SERVICES, INC.
/S/ MAX W. BATZER
- --------------------------------------
Max W. Batzer
Chairman, Chief Executive Officer
and Director
/S/ BRAD A. HUMMEL
- --------------------------------------
Brad A. Hummel
President, Chief Operating Officer
and Director
/S/ CHRISTOPHER L. TURNER
- --------------------------------------
Christopher L. Turner
Chief Financial Officer
and Principal Accounting Officer
/S/ BO W. LYCKE
- --------------------------------------
Bo W. Lycke
Director
Date: August 14, 1998
20
<PAGE>
EXHIBIT 11
DIAGNOSTIC HEALTH SERVICES, INC. & SUBSIDIARIES
Earnings Per Share
For the Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Total Issued Basic Diluted
Date # Shares Wtd. Avg. Wtd. Avg.
---------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued January 1, 1998 1/1/98 10,718,867 10,718,867
Treasury Shares 1/1/98 (233,259) (233,259)
Shares issued 1/1/98 - 6/30/98 Various 918,625 570,993
- -----------------------------------------------------------------------------------------------------------------------------------
Basic weighted average shares 6/30/98 11,404,233 11,056,601 11,056,601
===========================
Diluted:
- --------
Common stock equivalents (scheduled below) 853,697
Convertible Preferred - original issuance 642,857
Convertible Preferred - 12/31/96 dividend 6,129
Convertible Preferred - 12/31/97 dividend 46,607
----------
1,549,290
----------
Diluted weighted average shares 12,605,891
==========
Net Income (Loss) for the Six Months Ended June 30, 1998 ($667,826) ($667,826)
==========================
Earnings (Loss) Per Share $ (0.06) $ (0.05)
==========================
</TABLE>
<TABLE>
<CAPTION>
Schedule of Common Stock Equivalents
------------------------------------
Diluted
Average share price during period $10.6144 Diluted Net
Exercise Assumed Treas. Shs. Add'l
Stock options & warrants: Number Price Proceeds Acquired Shares
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bridge Warrants/Bank Warrants 10,000 6.2500 62,500 5,888 4,112
Prudential Warrants 60,000 12.2500 0 0 0
Stock options - Plan Year
1992 290,001 2.2100 640,902 60,380 229,621
1992 2,000 2.6250 5,250 495 1,505
1992 96,709 0.9375 90,665 8,542 88,167
1992 176,800 1.6875 298,350 28,108 148,692
1992 15,300 1.9375 29,644 2,793 12,507
1992 2,500 7.5000 18,750 1,766 734
1992 1,500 8.6250 12,938 1,219 281
1992 9,000 8.1250 73,125 6,889 2,111
1995 25,500 6.2500 159,375 15,015 10,485
1995 53,400 8.0000 427,200 40,247 13,153
1995 59,939 10.6875 640,598 60,352 (413)
1995 115,700 8.6250 997,913 94,015 21,685
1995 102,000 1.9375 197,625 18,619 83,381
1995 119,000 4.2500 505,750 47,647 71,353
1995 6,000 5.3750 32,250 3,038 2,962
1995 39,250 6.2500 245,313 23,111 16,139
1995 18,700 8.0000 149,600 14,094 4,606
1995 2,500 10.2500 25,625 2,414 86
1997 271,100 7.4375 2,016,306 189,959 81,141
1997 150,000 8.1875 1,228,125 115,703 34,297
1997 220,061 10.6875 2,351,902 221,576 (1,515)
1997 152,700 8.6258 1,317,160 124,092 28,608
- ---------------------------------------------------------------------------------------------------------------------------------
Total Common Stock Equivalents 1,999,660 853,697
=================================================================================================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
PERIOD ENDED 6/30/98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000895659
<NAME> DIAGNOSTIC HEALTH SERVICES, INC.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 0 5,731,972
<SECURITIES> 0 0
<RECEIVABLES> 0 15,281,970
<ALLOWANCES> 0 (403,039)
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 27,346,614
<PP&E> 0 45,087,396
<DEPRECIATION> 0 (10,214,699)
<TOTAL-ASSETS> 0 109,505,318
<CURRENT-LIABILITIES> 0 11,047,722
<BONDS> 0 35,536,153
0 696
0 0
<COMMON> 0 11,637
<OTHER-SE> 0 55,490,981
<TOTAL-LIABILITY-AND-EQUITY> 0 109,505,318
<SALES> 15,153,993 29,568,383
<TOTAL-REVENUES> 15,153,993 29,568,383
<CGS> 0 0
<TOTAL-COSTS> 17,060,368 28,209,912
<OTHER-EXPENSES> (39,159) (92,292)
<LOSS-PROVISION> 113,631 257,775
<INTEREST-EXPENSE> 1,160,868 2,175,206
<INCOME-PRETAX> (3,141,715) (982,218)
<INCOME-TAX> (1,005,430) (314,392)
<INCOME-CONTINUING> (2,136,285) (667,826)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,136,285) (667,826)
<EPS-PRIMARY> (0.19) (0.06)
<EPS-DILUTED> (0.19) (0.06)
</TABLE>
