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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, 1997
[ ] 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
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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 July 15, 1997
------------------- -------------
Common Stock, $.01 par value 19,293,267
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<PAGE>
PART I
FINANCIAL INFORMATION
-2-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($ in thousands, except per share data)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Fee revenue:
Lithotripsy:
Fee revenues $ 20,643 $ 17,044 $ 39,732 $ 23,113
Management fees 1,794 1,060 3,145 1,614
Equity income 661 372 981 751
--------------- --------------- --------------- ---------------
23,098 18,476 43,858 25,478
Cardiac 122 219 251 441
--------------- --------------- --------------- ---------------
23,220 18,695 44,109 25,919
--------------- --------------- --------------- ---------------
Costs and expenses:
Cost of services and general
and administrative expense
Lithotripsy 6,526 4,728 12,324 6,991
Cardiac 70 166 162 325
Corporate 1,476 1,362 2,838 1,961
--------------- --------------- --------------- ---------------
8,072 6,256 15,324 9,277
Depreciation and
amortization 2,064 1,851 4,148 3,000
--------------- --------------- --------------- ---------------
10,136 8,107 19,472 12,277
--------------- --------------- --------------- ---------------
Operating income 13,084 10,588 24,637 13,642
Other income (deductions):
Interest and dividends 156 29 295 51
Interest expense (1,979) (1,467) (3,743) (1,976)
Financing costs -- (3,535) (360) (3,535)
Other, net 50 118 153 198
--------------- --------------- --------------- ---------------
(1,773) (4,855) (3,655) (5,262)
--------------- --------------- --------------- ---------------
Minority interest in
consolidated income 6,470 5,765 12,335 6,242
Income before provision
for income taxes 4,841 (32) 8,647 2,138
Provision for income taxes 1,171 321 2,101 585
--------------- --------------- --------------- ---------------
Net income $ 3,670 $ (353) $ 6,546 $ 1,553
=============== =============== =============== ===============
Primary earnings per share:
Net income $ 0.19 $ (0.02) $ 0.34 $ 0.09
=============== =============== =============== ===============
Weighted average shares
outstanding 19,514 18,752 19,498 17,426
=============== =============== =============== ===============
Fully diluted earnings per share:
Net income $ 0.19 $ (0.02) $ 0.34 $ 0.09
=============== =============== =============== ===============
Weighted average shares
outstanding 19,517 19,142 19,498 18,317
=============== =============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands) June 30, December 31,
1997 1996
--------------- ---------------
ASSETS
Current assets:
Cash $ 13,708 $ 20,096
Accounts receivable, less allowance
for doubtful accounts of $584 in
1997 and $335 in 1996 16,501 16,346
Other receivables 1,424 1,842
Deferred income taxes 776 948
Prepaid expenses and
other current assets 964 841
--------------- ---------------
Total current assets 33,373 40,073
Property and equipment:
Equipment, furniture and fixtures 23,077 22,339
Leasehold improvements 113 113
--------------- ---------------
23,190 22,452
Less accumulated depreciation and
amortization (9,096) (7,122)
--------------- ---------------
Property and equipment, net 14,094 15,330
Other investments 11,645 8,100
Goodwill, at cost,
net of amortization 142,024 132,302
Other noncurrent assets 2,308 1,948
--------------- ---------------
$ 203,444 $ 197,753
=============== ===============
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
1997 1996
--------------- ---------------
LIABILITIES:
Current Liabilities:
Current portion of long-term debt $ 9,951 $ 10,522
Accounts payable 6,203 4,451
Accrued expenses 6,359 16,582
--------------- ---------------
Total current liabilities 22,513 31,555
Long-term debt, net of
current portion 76,374 70,910
Deferred income taxes 6,046 5,423
--------------- ---------------
Total liabilities 104,933 107,888
Minority interest 14,779 13,438
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
1,000,000 shares authorized;
none outstanding -- --
Common stock, $.01 par value,
40,000,000 shares authorized;
19,290,267 issued in 1997 and
19,078,933 issued in 1996 193 191
Capital in excess of par value 84,028 83,271
Accumulated deficit (489) (7,035)
--------------- ---------------
Total stockholders' equity 83,732 76,427
--------------- ---------------
$ 203,444 $ 197,753
=============== ===============
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,
1997 1996
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $ 43,135 $ 24,314
Cash paid to employees, suppliers
of goods and others (16,366) (12,092)
Interest received 293 52
Interest paid (3,754) (1,850)
Income taxes paid (415) (562)
--------------- ---------------
Net cash provided by
operating activities 22,893 9,862
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of lithotripter operations (13,980) (63,884)
Deferred payments on lithotripter
entities acquired -- (3,387)
Purchase of equipment and
leasehold improvements (474) (654)
Distributions from investments 1,051 1,175
Purchase of investments (129) --
Other (112) 57
--------------- ---------------
Net cash (used in)
investing activities (13,644) (66,693)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 50,010 70,500
Payments on notes payable,
exclusive of interest (45,148) (4,645)
Distributions to minority interest (20,779) (4,876)
Exercise of stock options 280 337
--------------- ---------------
Net cash (used in)
financing activities (15,637) 61,316
--------------- ---------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (6,388) 4,485
Cash and cash equivalents,
beginning of period 20,096 4,692
--------------- ---------------
Cash and cash equivalents,
end of period $ 13,708 $ 9,177
=============== ===============
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,
1997 1996
--------------- ---------------
Reconciliation of net income to
cash provided by operating activities
Net income $ 6,547 $ 1,553
Adjustments to reconcile net income
to cash provided by operating
activities:
Minority interest in
consolidated income 12,335 6,243
Depreciation and amortization 4,148 3,000
Provision for deferred income taxes 667 158
Provision for uncollectible accounts 107 84
Equity in earnings of affiliates (980) (755)
Writeoff loan fees -- 696
Other 38 --
Changes in operating assets and
liabilities, net of effect of
purchase transactions:
Accounts receivable (263) (1,125)
Other receivables 419 279
Other current assets (142) 505
Accounts payable (927) (474)
Accrued expenses 944 (302)
--------------- ---------------
Total adjustments 16,346 8,309
--------------- ---------------
Net cash provided by
operating activities $ 22,893 $ 9,862
=============== ===============
See notes to consolidated financial statements
-7-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(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, 1996 and reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
financial position as of June 30, 1997 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, 1996 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. Acquisitions:
-------------
Effective May 1, 1997 the Company purchased a 38.25% interest in a partnership
that operates a mobile lithotripter in Tennessee and Georgia for $3,470,000 in
cash. This was accounted for using the purchase method of accounting.
Effective June 1, 1997, the Company purchased 100% of the stock in a Company
that operates a fixed site lithotripter in Washington and a mobile lithotripter
that operates in California and Oregon. The purchase price is $1,339,000 cash
plus future payments based on annual revenues during the next two years. The
cash purchase price wasn't funded until July, 1997. This was accounted for using
the purchase method of accounting.
3. Issuance of Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share".
----------------------------------------------------------------------------
In February, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", which is
effective for interim period and annual financial statements ending after
December 15, 1997. Early adoption of the statement is not permitted. SFAS No.
128 is designed to improve the EPS information provided in financial statements
by simplifying the existing computational guidelines, revising the disclosure
requirements and increasing the comparability of EPS data on an international
basis. The Company believes that adoption of the statement will not have a
material effect on its earnings per share disclosure.
-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, 1997, total revenues increased $18,190,000
(70%) as compared to the same period in 1996. Revenues from lithotripter
operations increased by $18,380,000 primarily due to the acquisition of (1) one
lithotripter entity that owned or managed thirty-one lithotripters throughout
the U.S. in April 1996, (2) purchase of additional interest in 10 partnerships
in January, 1997, (3) one lithotripter entity that owned two lithotripters, and
(4) 38.25% interest in a lithotripter operation that operated one lithotripter.
Revenues from cardiac centers decreased $190,000 primarily due to one sold
cardiac center.
For the three months ended June 30, 1997, total revenues increased $4,525,000
(24%) as compared to the same period in 1996. Revenues from lithotripter
operations increased by $4,622,000 primarily due to the acquisitions discussed
above. Revenues from cardiac centers decreased $97,000 primarily due to one sold
cardiac center.
Expenses
- --------
For the six months ended June 30, 1997, costs and expenses decreased from 36% to
34% of revenues, but increased $6,047,000 (65%) in absolute terms, compared to
the same period in 1996. Costs of services associated with lithotripter
operations increased $5,333,000 (76%) in absolute terms and from 27% to 28% of
lithotripter revenues primarily due to the acquisitions discussed above. Cost of
services associated with cardiac centers decreased $163,000 (50%) primarily due
to one sold cardiac center. Corporate expenses decreased from 8% to 6% of
revenues as the Company was able to successfully grow without proportionately
adding overhead. Corporate expenses increased $877,000 (43%) primarily due to
the additional corporate expenses associated with the acquisitions discussed
above, management incentive plans tied to the performance of the Company and
transition expenses associated with the integration of the corporate offices.
For the three months ended June 30, 1997, costs and expenses increased from 33%
to 35% of revenues and increased $1,816,000 (29%) in absolute terms, compared to
the same period in 1996. Costs of services associated with lithotripter
operations increased $1,798,000 (38%) in absolute terms and increased from 26%
to 28% of lithotripter revenues due to the acquisitions discussed above and
restructuring of the regional operations. Cost of services associated with
cardiac centers decreased $96,000 (58%) primarily due to one sold cardiac
center. Corporate expenses decreased from 7% to 6% of revenues, and increased
$114,000 (8%) in absolute terms, due to the reasons discussed above.
Other Income (Deductions)
- -------------------------
For the six months ended June 30, 1997, other deductions decreased $1,607,000
primarily due to the Company expensing in 1996 $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. This was offset by interest expense
increase of $1,767,000 due to higher debt balances in 1997 as a result of the
acquisitions discussed above.
For the three months ended June 30, 1997, other deductions decreased $3,082,000
primarily due to the reasons discussed above.
-9-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Cash was $13,708,000 and $20,096,000 at June 30, 1997 and December 31, 1996,
respectively. Cash provided by operations for the six months ended June 30, 1997
was $22,893,000 compared to cash provided by operations for the six months ended
June 30, 1996 in the amount of $9,862,000.
Cash used in investing activities for the six months ended June 30, 1997 was
$13,980,000 compared to cash used in investing activities for the six months
ended June 30, 1996 in the amount of $63,884,000. In 1997, the Company used
$13,980,000 to purchase (1) additional interests in 10 partnerships, (2) 100% of
the stock of a company that operates two units and (3) 38.25% interest in a
lithotripter operation that operates one lithotripter. In 1996, the Company used
$63,884,000 to acquire the acquisition of a lithotripter entity, that owns or
manages 31 lithotripters. In addition, the Company paid out $3,387,000 in
deferred payments on lithotripter entities acquired previously.
Cash used in financing activities for the six months ended June 30, 1997 was
$15,637,000, primarily due to distributions to minority interests of $20,779,000
offset by new borrowings of $50,010,000 less payments on notes payable of
$45,148,000. 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.
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 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
On June 18, 1997 an annual meeting of the shareholders of the Company
was held to consider and vote on:
1) Election of eight directors to the board of directors;
The nominees for director were:
Paul Butrus, William E. Foree, M.D., Joseph Jenkins, M.D., J.D.,
Irwin Katz, J.A. McEntire IV, William A. Searles,
Kenneth S. Shifrin, and Michael J. Spalding, M.D.
Proxies for this meeting were solicited pursuant to Regulation 14
under the Act and all nominees were elected.
2) Amendment to the Company's 1993 Stock Option Plan increasing the
aggregate number of shares to be issued by 500,000.
There were 13,795,508 affirmative votes and 1,861,553 negative votes
received for this amendment.
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
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: July 28, 1997 By: /s/ Cheryl Williams
________________________
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, 1997 AND 1996
(Unaudited)
(In thousands, net income per share
in dollars)
Primary Fully diluted
earnings earnings
per share per share
1997
- ----
Net income applicable to
common stock $ 3,670 $ 3,670
=============== ===============
Average number of shares
issued & outstanding 19,277 19,277
Average stock option shares 237 240
--------------- ---------------
Shares for earnings calculation 19,514 19,517
=============== ===============
Net income per share $ 0.19 $ 0.19
=============== ===============
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)
=============== ===============
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, 1997 AND 1996
(Unaudited)
(In thousands, net income per share
in dollars)
Primary Fully diluted
earnings earnings
per share per share
1997
- ----
Net income applicable to
common stock $ 6,546 $ 6,546
=============== ===============
Average number of shares
issued & outstanding 19,248 19,248
Average stock option shares 250 250
--------------- ---------------
Shares for earnings calculation 19,498 19,498
=============== ===============
Net income per share $ 0.34 $ 0.34
=============== ===============
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
=============== ===============
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 June 30, 1997 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-31-1997 Dec-31-1997
<PERIOD-START> Apr-01-1997 Jan-01-1997
<PERIOD-END> Jun-30-1997 Jun-30-1997
<CASH> 13,708 13,708
<SECURITIES> 0 0
<RECEIVABLES> 16,501 16,501
<ALLOWANCES> 584 584
<INVENTORY> 0 0
<CURRENT-ASSETS> 33,373 33,373
<PP&E> 23,190 23,190
<DEPRECIATION> 9,096 9,096
<TOTAL-ASSETS> 203,444 203,444
<CURRENT-LIABILITIES> 22,513 22,513
<BONDS> 0 0
0 0
0 0
<COMMON> 193 193
<OTHER-SE> 83,539 83,539
<TOTAL-LIABILITY-AND-EQUITY> 203,444 203,444
<SALES> 0 0
<TOTAL-REVENUES> 23,220 44,109
<CGS> 0 0
<TOTAL-COSTS> 8,072 15,324
<OTHER-EXPENSES> 2,064 4,148
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,979 3,743
<INCOME-PRETAX> 4,841 8,647
<INCOME-TAX> 1,171 2,101
<INCOME-CONTINUING> 3,670 6,546
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,670 6,546
<EPS-PRIMARY> 0.19 0.34
<EPS-DILUTED> 0.19 0.34
</TABLE>
