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 September 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 at
Title of Each Class October 31, 1996
------------------- -------------------------------
Common Stock, $.01 par value 19,078,933
<PAGE>
PART I
FINANCIAL INFORMATION
-2-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----- ------ ------ -----
<S> <C> <C> <C> <C>
Fee revenue:
Lithotripsy:
Fee revenues $ 22,118 $ 4,810 $ 45,231 $ 12,964
Management fees 1,485 656 3,099 849
Equity income 496 459 1,247 894
--------------- --------------- --------------- ---------------
24,099 5,925 49,577 14,707
Cardiac 201 233 642 856
--------------- --------------- --------------- ---------------
24,300 6,158 50,219 15,563
--------------- --------------- --------------- ---------------
Costs and expenses:
Cost of services and general
and administrative expense
Lithotripsy 6,278 1,236 12,956 3,552
Cardiac 162 734 487 1,414
Corporate 1,363 643 3,324 1,789
--------------- --------------- --------------- ---------------
7,803 2,613 16,767 6,755
Depreciation and amortization 2,286 705 5,286 2,032
--------------- --------------- --------------- ---------------
10,089 3,318 22,053 8,787
--------------- --------------- --------------- ---------------
Operating income 14,211 2,840 28,166 6,776
Other income (deductions):
Interest and dividends 35 33 86 113
Interest expense (1,922) (265) (4,211) (776)
Loan fees and stock offering costs -- -- (3,535) --
Other, net 200 339 398 378
--------------- --------------- --------------- ---------------
(1,687) 107 (7,262) (285)
--------------- --------------- --------------- ---------------
Income before provision for income taxes
and minority interest 12,524 2,947 20,904 6,491
Minority interest in consolidated income 7,716 430 13,958 892
Provision for income taxes 791 252 1,376 454
--------------- --------------- --------------- ---------------
Net income $ 4,017 $ 2,265 $ 5,570 $ 5,145
=============== =============== =============== ===============
Primary earnings per share:
Net income $ 0.21 $ 0.15 $ 0.31 $ 0.34
=============== =============== =============== ===============
Weighted average shares outstanding 19,515 15,195 18,120 15,013
=============== =============== =============== ===============
Fully diluted earnings per share:
Net income $ 0.21 $ 0.15 $ 0.31 $ 0.34
=============== =============== =============== ===============
Weighted average shares outstanding 19,515 15,308 18,478 15,177
=============== =============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
September 30, December 31,
1996 1995
-------------- --------------
ASSETS
Current assets:
Cash $ 10,456 $ 4,692
Notes receivable 10 181
Accounts receivable, less allowance
for doubtful accounts of $332 in
1996 and $232 in 1995 17,887 4,109
Other receivables 1,853 183
Deferred income taxes 803 770
Prepaid expenses and
other current assets 833 1,003
-------------- --------------
Total current assets 31,842 10,938
Property and equipment:
Equipment, furniture and fixtures 20,876 7,867
Leasehold improvements 113 113
-------------- --------------
20,989 7,980
Less accumulated depreciation and
amortization (6,135) (3,272)
-------------- --------------
Property and equipment, net 14,854 4,708
Equity investments 7,151 7,623
Goodwill, at cost, net of amortization 132,941 52,679
Other noncurrent assets 1,822 1,679
-------------- --------------
$ 188,610 $ 77,627
============== ==============
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
($ in thousands)
September 30, December 31,
1996 1995
-------------- --------------
LIABILITIES:
Current Liabilities:
Current portion of long-term debt $ 10,578 $ 3,043
Accounts payable 3,554 4,814
Accrued expenses 5,158 2,862
-------------- --------------
Total current liabilities 19,290 10,719
Long-term debt, net of current portion 71,509 22,323
Deferred income taxes 5,368 1,212
-------------- --------------
Total liabilities 96,167 34,254
Minority interest 18,588 623
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 (10,426) (15,996)
Treasury stock, at cost,
30,000 shares at December 31,1995 -- (101)
-------------- --------------
Total stockholders' equity 73,855 42,750
-------------- --------------
$ 188,610 $ 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)
Nine Months Ended September 30,
1996 1995
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $ 49,276 $ 14,297
Cash paid to employees, suppliers
of goods and others (20,069) (4,604)
Interest received 86 116
Interest paid (3,296) (922)
Income taxes paid (702) (232)
-------------- --------------
Net cash provided by
operating activities 25,295 8,655
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of lithotripter operations (63,884) (7,087)
Deferred payments on
lithotripter entities (3,387) --
Purchase of equipment and
leasehold improvements (1,071) (436)
Proceeds from sales of equipment -- 17
Distributions from investments 1,751 679
Sale of investment in American
Physicians Service Group, Inc. -- 2,050
Other (172) (138)
-------------- --------------
Net cash (used in)
investing activities (66,763) (4,915)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable,
exclusive of interest (12,696) (8,346)
Borrowings on notes payable 72,000 3,500
Distributions to minority interest (12,409) (714)
Exercise of stock options 337 39
-------------- --------------
Net cash provided by (used in)
financing activities 47,232 (5,521)
-------------- --------------
NET INCREASE (DECREASE) IN CASH, CASH
EQUIVALENTS AND CASH, PLEDGED 5,764 (1,781)
Cash, cash equivalents and cash
pledged, beginning of period 4,692 2,912
-------------- --------------
Cash, cash equivalents and cash
pledged, end of period $ 10,456 $ 1,131
============== ==============
See notes to consolidated financial statements
-6-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
Nine Months Ended September 30,
1996 1995
-------------- --------------
Reconciliation of net income to
cash provided by operating activities
Net income $ 5,570 $ 5,145
Adjustments to reconcile net income
to cash provided by
operating activities:
Depreciation and amortization 5,286 2,032
Provision for uncollectible accounts 290 754
Equity in earnings of affiliates (1,253) (896)
Minority interest in consolidated income 13,957 892
Writeoff loan fees 696 --
Provision for deferred income taxes 633 --
Other -- (264)
Changes in operating assets and
liabilities, net of effect
of purchase transactions:
Notes receivable 179 1,311
Accounts receivable (228) (566)
Other receivables 163 419
Other current assets 700 39
Accounts payable (485) (277)
Accrued expenses (213) 66
-------------- --------------
Total adjustments 19,725 3,510
-------------- --------------
Net cash provided by
operating activities $ 25,295 $ 8,655
============== ==============
See notes to consolidated financial statements
-7-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 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 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. Subsequent Events:
------------------
In October, 1996, the Company filed with the Securities and Exchange Commission
to register 2,265,240 shares of common stock held by certain shareholders. None
of these shareholders are affiliates of the Company and the Company will not
receive any of the proceeds from the sale of these shares. The Company will bear
the expenses of the registration.
-8-
<PAGE>
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
Revenues
- ---------
For the nine months ended September 30, 1996, total revenues increased
$34,656,000 (223%) as compared to the same period in 1995. Revenues from
lithotripter operations increased by $34,870,000 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, as of July 1, 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 $214,000
primarily due to four discontinued/sold cardiac centers.
For the three months ended September 30, 1996, total revenues increased
$18,142,000 (295%) as compared to the same period in 1995. Revenues from
lithotripter operations increased by $18,174,000 primarily due to the
acquisitions discussed above.
Expenses
- ---------
For the nine months ended September 30, 1996, costs and expenses decreased from
43% to 33% of revenues, but increased $10,012,000 (148%) in absolute terms,
compared to the same period in 1995. Costs of services associated with
lithotripter operations increased $9,404,000 (265%) in absolute terms and from
24% to 26% of lithotripter revenues primarily due to the acquisitions discussed
above. Cost of services associated with cardiac centers decreased $927,000 (66%)
primarily due to four discontinued/sold cardiac centers. Corporate expenses
decreased from 11% to 7% of revenues as the Company was able to successfully
grow without proportionately adding overhead. Corporate expenses increased
$1,535,000 (86%) primarily due to the additional corporate expenses associated
with the acquisition discussed above and the management incentive plans tied to
the performance of the Company.
For the three months ended September 30, 1996, costs and expenses decreased from
42% to 32% of revenues, but increased $5,190,000 (199%) in absolute terms,
compared to the same period in 1995. Costs of services associated with
lithotripter operations increased $5,042,000 (408%) in absolute terms and from
21% to 26% of lithotripter revenues for the reasons described above. Cost of
services associated with cardiac centers decreased $572,000 (78%) primarily due
to one discontinued/sold cardiac center. Corporate expenses decreased from 10%
to 6% of revenues, and increased $720,000 (112%) in absolute terms, due to the
reasons discussed above.
Other Income (Deductions)
- -------------------------
For the nine months ended September 30, 1996, other deductions increased
$6,977,000 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 cancelled in August, 1996 and (2) interest expense increased
$3,435,000 due to $72,000,000 in new borrowings in 1996 primarily for the
acquisition of the lithotripter entity in April, 1996.
For the three months ended September 30, 1996, other deductions increased
$1,794,000 primarily due to the reasons discussed above.
-9-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Cash was $10,456,900 and $4,692,000 at September 30, 1996 and December 31, 1995,
respectively. Cash provided by operations for the nine months ended September
30, 1996 was $25,295,000 compared to cash provided by operations for the nine
months ended September 30, 1995 in the amount of $8,655,000.
Cash used in investing activities for the nine months ended September 30, 1996
was $66,763,000 compared to cash used in investing activities for the nine
months ended September 30, 1995 in the amount of $4,915,000. 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 nine months ended September 30, 1996 was $47,232,000, which included
$72.0 million in new borrowings for the acquisition discussed above, offset by
$12,409,000 in distributions to minority interest partners and $12,696,000 in
payments on notes payable. Cash used in financing activities for the nine months
ended September 30, 1995 was $5,521,000, which included $8,346,000 in payments
on notes payable and $714,000 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.
27. Financial Data Schedule
(b) Current Reports on Form 8-K
None.
-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: October 31, 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 SEPTEMBER 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 $ 4,017 $ 4,017
============== ==============
Average number of shares
issued & outstanding 19,071 19,071
Average stock option and warrant shares 444 444
-------------- --------------
Shares for earnings calculation 19,515 19,515
============== ==============
Net income per share $ 0.21 $ 0.21
============== ==============
1995
Net income applicable to common stock $ 2,265 $ 2,265
============== ==============
Average number of shares
issued & outstanding 14,641 14,641
Average reciprocal stockholdings (499) (499)
Average stock option shares 1,053 1,166
-------------- --------------
Shares for earnings calculation 15,195 15,308
============== ==============
Net income per share $ 0.15 $ 0.15
============== ==============
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 NINE MONTHS ENDED SEPTEMBER 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 $ 5,570 $ 5,570
Adjustment: Add back interest expense
on convertible debt -- 101
Adjusted net income applicable to ______________ ______________
common stock $ 5,570 $ 5,671
============== ==============
Average number of shares
issued & outstanding 17,148 17,148
Average stock option and warrant shares 972 1,030
Average convertible debt shares -- 300
-------------- --------------
Shares for earnings calculation 18,120 18,478
============== ==============
Net income per share $ 0.31 $ 0.31
============== ==============
1995
Net income applicable to common stock $ 5,145 $ 5,145
============== ==============
Average number of shares
issued & outstanding 14,631 14,631
Average reciprocal stockholdings (630) (630)
Average stock option shares 1,012 1,176
-------------- --------------
Shares for earnings calculation 15,013 15,177
============== ==============
Net income per share $ 0.34 $ 0.34
============== ==============
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
September 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 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 10,456 10,456
<SECURITIES> 0 0
<RECEIVABLES> 17,887 17,887
<ALLOWANCES> 332 332
<INVENTORY> 0 0
<CURRENT-ASSETS> 31,842 31,842
<PP&E> 20,989 20,989
<DEPRECIATION> 6,135 6,135
<TOTAL-ASSETS> 188,610 188,610
<CURRENT-LIABILITIES> 19,290 19,290
<BONDS> 0 0
0 0
0 0
<COMMON> 191 191
<OTHER-SE> 73,664 73,664
<TOTAL-LIABILITY-AND-EQUITY> 188,610 188,610
<SALES> 0 0
<TOTAL-REVENUES> 24,300 50,219
<CGS> 0 0
<TOTAL-COSTS> 7,803 16,767
<OTHER-EXPENSES> 2,286 5,286
<LOSS-PROVISION> 150 150
<INTEREST-EXPENSE> 1,922 4,211
<INCOME-PRETAX> 4,808 6,946
<INCOME-TAX> 791 1,376
<INCOME-CONTINUING> 4,017 5,570
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,017 5,570
<EPS-PRIMARY> 0.21 0.31
<EPS-DILUTED> 0.21 0.31
</TABLE>
