UNITED STATES
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, 1996
[ ] 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: 0-22392
_______________________________________
PRIME MEDICAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2652727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 Capital of Texas Highway, Austin, Texas 78746
(Address of principal executive offices) (Zip Code)
(512) 328-2892
(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 equity, as of the latest practicable date.
Number of Shares Outstanding
Title of Each Class July 31, 1996
_____________________________ ____________________________
Common Stock, $.01 par value 19,070,600
<PAGE>
PART I
FINANCIAL INFORMATION
-2-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Fee revenue:
Lithotripsy:
Fee revenues $ 17,044 $ 4,226 $ 23,113 $ 8,154
Management fees 1,060 95 1,614 193
Equity income 372 265 751 435
--------------- --------------- --------------- ---------------
18,476 4,586 25,478 8,782
Cardiac 219 314 441 624
--------------- --------------- --------------- ---------------
18,695 4,900 25,919 9,406
--------------- --------------- --------------- ---------------
Costs and expenses:
Cost of services and general
and administrative expense
Lithotripsy 4,728 1,181 6,991 2,316
Cardiac 166 388 325 680
Corporate 1,362 609 1,961 1,145
--------------- --------------- --------------- ---------------
6,256 2,178 9,277 4,141
Depreciation and amortization 1,851 657 3,000 1,328
--------------- --------------- --------------- ---------------
8,107 2,835 12,277 5,469
--------------- --------------- --------------- ---------------
Operating income 10,588 2,065 13,642 3,937
Other income (deductions):
Interest and dividends 29 37 51 80
Interest expense (1,467) (232) (1,976) (511)
Loan fees and stock offering costs (3,535) -- (3,535) --
Other, net 118 28 198 39
--------------- --------------- --------------- ---------------
(4,855) (167) (5,262) (392)
--------------- --------------- --------------- ---------------
Income before provision for income taxes
and minority interest 5,733 1,898 8,380 3,545
Minority interest in consolidated income 5,765 248 6,242 462
Provision for income taxes 321 51 585 203
--------------- --------------- --------------- ---------------
Net income $ (353) $ 1,599 $ 1,553 $ 2,880
=============== --------------- =============== ---------------
Primary earnings per share:
Net income $ (0.02) $ 0.11 $ 0.09 $ 0.19
=============== =============== =============== ===============
Weighted average shares outstanding 18,752 15,006 17,426 14,901
=============== =============== =============== ===============
Fully diluted earnings per share:
Net income $ (0.02) $ 0.11 $ 0.09 $ 0.19
=============== =============== =============== ===============
Weighted average shares outstanding 19,142 15,016 18,317 14,990
=============== =============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
June 30, December 31,
1996 1995
____________ ____________
ASSETS
Current assets:
Cash $ 9,177 $ 4,692
Notes receivable 51 181
Accounts receivable, less allowance
for doubtful accounts of $221 in
1996 and $232 in 1995 18,991 4,109
Other receivables 1,870 183
Deferred income taxes 680 770
Prepaid expenses and other current assets 1,027 1,003
------------ ------------
Total current assets 31,796 10,938
Property and equipment:
Equipment, furniture and fixtures 20,488 7,867
Leasehold improvements 113 113
------------ ------------
20,601 7,980
Less accumulated depreciation and
amortization (4,890) (3,272)
------------ ------------
Property and equipment, net 15,711 4,708
Equity investments 7,009 7,623
Goodwill, at cost, net of amortization 133,850 52,679
Other noncurrent assets 1,898 1,679
------------ ------------
$ 190,264 $ 77,627
============ ============
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
($ in thousands)
June 30, December 31
1996 1995
____________ ____________
LIABILITIES:
Current Liabilities:
Current portion of long-term debt $ 9,930 $ 3,043
Accounts payable 3,564 4,814
Accrued expenses 5,071 2,862
------------ ------------
Total current liabilities 18,565 10,719
Long-term debt, net of current portion 78,642 22,323
Deferred income taxes 4,813 1,212
------------ ------------
Total liabilities 102,020 34,254
Minority interest 18,406 623
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
1,000,000 shares authorized;
none outstanding -- --
Common stock, $.01 par value,
40,000,000 shares authorized;
19,070,600 issued in 1996 and
14,729,663 issued in 1995 191 147
Capital in excess of par value 84,090 58,700
Accumulated deficit (14,443) (15,996)
Treasury stock, at cost,
30,000 shares at December 31, 1995 -- (101)
------------ ------------
Total stockholders' equity 69,838 42,750
------------ ------------
$ 190,264 $ 77,627
============ ============
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
Six Months Ended June 30,
1996 1995
____________ ____________
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $ 24,314 $ 9,194
Cash paid to employees, suppliers
of goods and others (12,092) (3,330)
Interest received 52 80
Interest paid (1,850) (607)
Income taxes paid (562) (192)
------------ ------------
Net cash provided by
operating activities 9,862 5,145
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of lithotripter operations (63,884) --
Deferred payments on lithotripter
entities acquired (3,387) --
Purchase of equipment and
leasehold improvements (654) (112)
Proceeds from sales of equipment -- 12
Distributions from investments 1,175 445
Purchase of investments -- (46)
Sale of investment in American
Physicians Service Group, Inc. -- 97
Other 57 (26)
------------ ------------
Net cash provided by (used in)
investing activities (66,693) 370
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable,
exclusive of interest (4,645) (5,449)
Borrowings on notes payable 70,500 --
Distributions to minority interest (4,876) (496)
Exercise of stock options 337 38
------------ ------------
Net cash provided by (used in)
financing activities 61,316 (5,907)
------------ ------------
NET INCREASE (DECREASE) IN CASH, CASH
EQUIVALENTS AND CASH, PLEDGED 4,485 (392)
Cash, cash equivalents and cash
pledged, beginning of period 4,692 2,912
------------ ------------
Cash, cash equivalents and cash
pledged, end of period $ 9,177 $ 2,520
============ ============
See notes to consolidated financial statements
-6-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
Six Months Ended June 30,
1996 1995
___________ ____________
Reconciliation of net income to
cash provided by operating activities
Net income $ 1,553 $ 2,880
Adjustments to reconcile net income
to cash provided by
operating activities:
Depreciation and amortization 3,000 1,328
Provision for uncollectible accounts 84 249
Equity in earnings of affiliates (755) (433)
Minority interest in
consolidated income 6,243 463
Writeoff loan fees 696 --
Provision for deferred income taxes 158 (120)
Other -- 49
Changes in operating assets and
liabilities, net of effect of
purchase transactions:
Notes receivable 135 1,113
Accounts receivable (1,125) 98
Other receivables 144 425
Other current assets 505 214
Accounts payable (474) (991)
Accrued expenses (302) (130)
------------ ------------
Total adjustments 8,309 2,265
------------ ------------
Net cash provided by
operating activities $ 9,862 $ 5,145
============ ============
See notes to consolidated financial statements
-7-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
1. General
--------
The accompanying unaudited consolidated financial statements have been prepared
in conformity with the accounting principles stated in the audited financial
statements for the year ended December 31, 1995 and reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
financial position as of June 30, 1996 and the results of operations for the
periods presented. These statements have not been audited or reviewed by the
Company's independent certified public accountants. The operating results for
the interim periods are not necessarily indicative of results for the full
fiscal year.
The notes to consolidated financial statements appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 filed with the
Securities and Exchange Commission should be read in conjunction with this
Quarterly Report on Form 10-Q. There have been no significant changes in the
information reported in those notes other than from normal business activities
of the Company.
2. Noncash Investing and Financing Activities:
-------------------------------------------
In April 1996, the Company acquired the stock of Lithotripter, Inc., which
manages 31 lithotripters operating in 19 states, effective May 1, 1996. The
Company paid cash of $70 million and issued 1,636,364 shares of the Company's
stock. The acquisition was accounted for using the purchase method of
accounting. The effect of this transaction was as follows:
Current Assets increased $20,485,000
Noncurrent Assets increased 12,449,000
Goodwill increased 82,237,000
Current Liabilities increased 13,150,000
Noncurrent Liabilities and Minority Interest increased 86,128,000
Stockholders' Equity increased 15,893,000
In June 1996, the Company was notified by a noteholder that the noteholder was
electing to exercise its warrant for 724,597 shares of the Company's stock. The
noteholder utilized the note to pay the exercise price for the shares. The
effect of this transaction was:
Noncurrent Liabilities decreased $ 2,304,000
Stockholders' Equity increased 2,304,000
In June 1996, certain warrant holders notified the Company that they were
exercising their warrants. As of June 30, 1996, the cash payment had not yet
been received for the 520,000 shares of the Company's stock. The effect of these
transactions were:
Current Assets increased $ 1,749,000
Stockholders' Equity increased 1,749,000
3. Subsequent Events:
------------------
In June 1996, the Company filed with the Securities and Exchange Commission that
it would be offering approximately 5 million shares of the Company's stock and
that certain shareholders would be selling 4.9 million shares. In July, 1996,
the Company announced that it was postponing the stock offering due to the
general market decline.
-8-
<PAGE>
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
Results of Operations
- - ---------------------
Revenues
- - --------
For the six months ended June 30, 1996, total revenues increased $16,513,000
(176%) as compared to the same period in 1995. Revenues from lithotripter
operations increased by $16,696,000 primarily due to the acquisition of (1) one
lithotripter entity that owned or managed thirty-one lithotripters throughout
the U.S. (2) one lithotripter entity that owned or managed eight lithotripters,
and (3) 70% interest in a lithotripter operation that operated one lithotripter,
after June 30, 1995. In addition, the Company acquired a 32.5% interest in a
lithotripter operation that operated one lithotripter, in June 1995. Revenues
from cardiac centers decreased $183,000 primarily due to four discontinued/sold
cardiac centers.
For the three months ended June 30, 1996, total revenues increased $13,795,000
(282%) as compared to the same period in 1995. Revenues from lithotripter
operations increased by $13,890,000 primarily due to the acquisitions discussed
above. Revenues from cardiac centers decreased $95,000 primarily due to two
discontinued/sold cardiac centers.
Expenses
- - --------
For the six months ended June 30, 1996, costs and expenses decreased from 44% to
36% of revenues, but increased $5,136,000 (124%) in absolute terms, compared to
the same period in 1995. Costs of services associated with lithotripter
operations increased $4,675,000 (202%) in absolute terms, and from 26% to 27% of
lithotripter revenues primarily due to the acquisitions discussed above. Cost of
services associated with cardiac centers decreased $355,000 (52%) primarily due
to four discontinued/sold cardiac centers. Corporate expenses decreased from 12%
to 8% of revenues as the Company was able to successfully grow without
proportionately adding overhead. Corporate expenses increased $816,000 (71%)
primarily due to the additional corporate expenses associated with the
acquisition discussed above and management incentive plans tied to the
performance of the Company.
For the three months ended June 30, 1996, costs and
expenses decreased from 44% to 33% of revenues, but increased $4,078,000 (187%)
in absolute terms, compared to the same period in 1995. Costs of services
associated with lithotripter operations increased $3,547,000 (300%) in absolute
terms and remained flat at 26% of lithotripter revenues for the reasons
described above. Cost of services associated with cardiac centers decreased
$222,000 (57%) primarily due to two discontinued/sold cardiac centers. Corporate
expenses decreased from 12% to 7% of revenues, and increased $753,000 (124%) in
absolute terms, due to the reasons discussed above.
Other Income (Deductions)
- - --------------------------
For the six months ended June 30, 1996, other deductions increased $4,870,000
primarily due to (1) the Company wrote off $2,735,000 in fees paid to lenders to
obtain financing, and $800,000 in fees associated with the stock offering that
was postponed in July, 1996 and (2) interest expense increased $1,465,000 due to
$70,500,000 in new borrowings in 1996 primarily for the acquisition of the
lithotripter entity in April, 1996.
For the three months ended June 30, 1996, other deductions increased $4,688,000
primarily due to the reasons discussed above.
-9-
<PAGE>
Liquidity and Capital Resources
- - -------------------------------
Cash was $9,177,900 and $2,522,000 at June 30, 1996 and December 31, 1995,
respectively. Cash provided by operations for the six months ended June 30, 1996
was $9,862,000 compared to cash provided by operations for the six months ended
June 30, 1995 in the amount of $5,145,000.
Cash used in investing activities for the six months ended June 30, 1996 was
$66,693,000 compared to cash provided by investing activities for the six months
ended June 30, 1995 in the amount of $370,000. This was primarily due to the
acquisition of a lithotripter entity, that owns or manages 31 lithotripters,
which resulted in the net use of cash amounting to $63,884,000. In addition, the
Company paid out $3,387,000 in deferred payments on lithotripter entities
acquired previously. Cash provided by financing activities for the six months
ended June 30, 1996 was $61,316,000, which included $70.5 million in new
borrowings for the acquisition discussed above, offset by $4,876,000 in
distributions to minority interest partners and $4,645,000 in payments on notes
payable. Cash used in financing activities for the six months ended June 30,
1995 was $5,907,000, which included $5,449,000 in payments on notes payable and
$496,000 in distributions to minority interest partners.
The Company has utilized a substantial amount of cash for acquisitions since
1992. Management believes that its present cash position, together with funds
generated from operations, will provide sufficient resources to meet its cash
requirements for current operations. The Company expects to facilitate
additional acquisitions through cash flow, the issuance of seller debt and
outside debt financing.
-10-
<PAGE>
PART II
OTHER INFORMATION
-11-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11. Statement regarding computation of per share earnings.
(b) Current Reports on Form 8-K
On May 2, 1996, the Company filed a current report on Form 8-K that
disclosed the acquisition of all of the outstanding capital stock of
Lithotripters, Inc. Financial statements of the business acquired were
not available at the time.
On June 4, 1996, the Company filed a current report on Form 8-K/A that
included the financial statements of Lithotripters, Inc. and the
required Pro-Forma financial information.
-12-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME MEDICAL SERVICES, INC.
Date: August 5, 1996 By: /s/ Cheryl Williams
-----------------------
Chief Financial Officer
-13-
<PAGE>
EXHIBIT 11
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
COMPUTATION OF THE NET INCOME PER SHARE
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
(In thousands, net income per share
in dollars)
Primary Fully diluted
earnings earnings
per share per share
------------ ------------
1996
- - -----
Net income applicable to common stock ($ 353) ($ 353)
============ ============
Average number of shares issued & outstanding 17,597 17,597
Average stock option and warrant shares 1,155 1,545
------------ ------------
Shares for earnings calculation 18,752 19,142
============ ============
Net income per share ($ 0.02) ($ 0.02)
============ ============
1995
- - -----
Net income applicable to common stock $ 1,599 $ 1,599
============ ============
Average number of shares issued & outstanding 14,635 14,635
Average reciprocal stockholdings (690) (690)
Average stock option shares 1,061 1,071
------------ ------------
Shares for earnings calculation 15,006 15,016
============ ============
Net income per share $ 0.11 $ 0.11
============ ============
NOTE:
Primary and fully diluted income (loss) per share were computed by dividing net
income (loss) by the average number of shares outstanding plus the common stock
equivalents, which would arise from the exercise of dilutive stock options.
<PAGE>
EXHIBIT 11
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
COMPUTATION OF THE NET INCOME PER SHARE
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
(In thousands, net income per share
in dollars)
Primary Fully diluted
earnings earnings
per share per share
------------ ------------
1996
- - -----
Net income applicable to common stock $ 1,553 $ 1,553
Adjustment: Add back interest expense
on convertible debt -- 101
------------ ------------
Adjusted net income applicable to common stock $ 1,553 $ 1,654
============ ============
Average number of shares issued & outstanding 16,176 16,176
Average stock option and warrant shares 1,250 1,690
Average convertible debt shares -- 451
------------ ------------
Shares for earnings calculation 17,426 18,317
============ ============
Net income per share $ 0.09 $ 0.09
============ ============
1995
- - -----
Net income applicable to common stock $ 2,880 $ 2,880
============ ============
Average number of shares issued & outstanding 14,625 14,625
Average reciprocal stockholdings (706) (706)
Average stock option shares 982 1,071
------------ ------------
Shares for earnings calculation 14,901 14,990
============ ============
Net income per share $ 0.19 $ 0.19
============ ============
NOTE:
Primary and fully diluted income (loss) per share were computed by dividing net
income (loss) by the average number of shares outstanding plus the common stock
equivalents, which would arise from the exercise of dilutive stock options.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains Summary Financial Information extracted from the
June 30, 1996 Form 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 9,177 9,177
<SECURITIES> 0 0
<RECEIVABLES> 18,991 18,991
<ALLOWANCES> 221 221
<INVENTORY> 0 0
<CURRENT-ASSETS> 31,796 31,796
<PP&E> 20,601 20,601
<DEPRECIATION> 4,890 4,890
<TOTAL-ASSETS> 190,264 190,264
<CURRENT-LIABILITIES> 18,565 18,565
<BONDS> 0 0
0 0
0 0
<COMMON> 191 191
<OTHER-SE> 69,647 69,647
<TOTAL-LIABILITY-AND-EQUITY> 190,264 190,264
<SALES> 0 0
<TOTAL-REVENUES> 18,695 25,919
<CGS> 0 0
<TOTAL-COSTS> 6,256 9,277
<OTHER-EXPENSES> 1,851 3,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,467 1,976
<INCOME-PRETAX> (32) 2,118
<INCOME-TAX> 321 585
<INCOME-CONTINUING> (353) 1,553
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (353) 1,553
<EPS-PRIMARY> (.02) .09
<EPS-DILUTED> (.02) .09
</TABLE>
