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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 September 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
---------------------------
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 of 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 15, 1997
------------------- ----------------
Common Stock, $.01 par value 19,306,267
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<PAGE>
PART I
FINANCIAL INFORMATION
-2-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($ in thousands, except per share data)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- -------------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Fee revenue:
Lithotripsy:
Fee revenues $23,429 $22,118 $63,161 $45,231
Management fees 1,702 1,485 4,847 3,099
Equity income 695 496 1,676 1,247
--------- ------- --------- --------
25,826 24,099 69,684 49,577
Manufacturing 401 -- 401 --
Cardiac 120 201 371 642
Practice management 14 -- 14 --
---------- -------- -------- --------
26,361 24,300 70,470 50,219
---------- -------- -------- --------
Costs and expenses:
Cost of services and general
and administrative expense
Lithotripsy 6,461 6,278 18,785 12,956
Manufacturing 345 -- 345 --
Cardiac 80 162 242 487
Practice management 116 -- 116 --
Corporate 1,375 1,363 4,213 3,324
--------- -------- -------- -------
8,377 7,803 23,701 16,767
Depreciation and amortization 2,129 2 286 6,277 5,286
--------- -------- -------- -------
10,506 10,089 29,978 22,053
--------- ------- ------- -------
Operating income 15,855 14,211 40,492 28,166
Other income (deductions):
Interest and dividends 212 35 507 86
Interest expense (1,859) (1,922) (5,602) (4,211)
Loan fees and stock offering costs -- -- (360) (3,535)
Other, net (82) 200 71 398
---------- --------- --------- ---------
(1,729) (1,687) (5,384) (7,262)
---------- --------- --------- ---------
Income before provision for income taxes
and minority interest 14,126 12,524 35,108 20,904
Minority interest in consolidated income 7,680 7,716 20,015 13,958
Provision for income taxes 1,926 791 4,027 1,376
---------- --------- --------- --------
Net income $ 4,520 $ 4,017 $ 11,066 $ 5,570
========= ========= ========= ========
Primary earnings per share:
Net income $ 0.23 $ 0.21 $ 0.57 $ 0.31
======== ======== ========= ========
Weighted average shares outstanding 19,566 19,515 19,550 18,120
======== ======== ========= ========
Fully diluted earnings per share:
Net income $ 0.23 $ 0.21 $ 0.56 $ 0.31
======== ======== ========= ========
Weighted average shares outstanding 19,626 19,515 19,613 18,478
======== ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
September 30, December 31,
1997 1996
---- ----
ASSETS
Current assets:
Cash $18,792 $20,096
Accounts receivable, less allowance
for doubtful accounts of $801 in
1997 and $335 in 1996 18,271 16,346
Other receivables 1,640 1,842
Deferred income taxes 1,043 948
Prepaid expenses and other current assets 1,494 841
--------- ---------
Total current assets 41,240 40,073
Property and equipment:
Equipment, furniture and fixtures 24,288 22,339
Leasehold improvements 113 113
-------- --------
24,401 22,452
Less accumulated depreciation and
amortization ( 10,029) (7,122)
-------- -------
Property and equipment, net 14,372 15,330
Other investments 11,904 8,100
Goodwill, at cost, net of amortization 145,176 132,302
Other noncurrent assets 2,362 1,948
-------- --------
$215,054 $197,753
======== ========
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
($ in thousands)
September 30, December 31,
1997 1996
---- ----
LIABILITIES:
Current Liabilities:
Current portion of long-term debt $11,170 $10,522
Accounts payable 3,761 4,451
Accrued expenses 15,094 16,582
-------- --------
Total current liabilities 30,025 31,555
Long-term debt, net of current portion 73,556 70,910
Deferred income taxes 6,528 5,423
------- --------
Total liabilities 110,109 107,888
Minority interest 16,614 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;
19,306,267 issued in 1997 and
19,078,933 issued in 1996 193 191
Capital in excess of par value 84,105 83,271
Accumulated earnings (deficit) 4,033 ( 7,035)
--------- ----------
Total stockholders' equity 88,331 76,427
--------- ---------
$215,054 $197,753
======== ========
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
Nine Months Ended September 30,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $67,273 $ 49,276
Cash paid to employees, suppliers
of goods and others (23,900) (20,069)
Interest received 502 86
Interest paid (5,666) (3,296)
Income taxes paid (499) (702)
----------- ----------
Net cash provided by
operating activities 37,710 25,295
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of lithotripter operations (15,335) (63,884)
Deferred payments on lithotripter
entities acquired -- (3,387)
Purchase of equipment and
leasehold improvements (1,667) (1,071)
Proceeds from sales of equipment 25 --
Distributions from investments 1,798 1,751
Contributions to investments (311) --
Other (217) (172)
---------- ----------
Net cash (used in)
investing activities (15,707) (66,763)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 50,959 72,000
Payments on notes payable,
exclusive of interest (47,696) (12,696)
Distributions to minority interest (27,728) (12,409)
Contributions by minority interest 815 --
Exercise of stock options 343 337
---------- ----------
Net cash provided by (used in)
financing activities (23,307) 47,232
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,304) 5,764
Cash and cash equivalents, beginning of period 20,096 4,692
---------- ----------
Cash and cash equivalents, end of period $ 18,792 $ 10,456
========== ==========
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,
1997 1996
---- ----
Reconciliation of net income to
cash provided by operating activities
Net income $ 11,066 $ 5,570
Adjustments to reconcile net income
to cash provided by operating
activities:
Minority interest in consolidated income 20,015 13,957
Depreciation and amortization 6,277 5,286
Provision for deferred income taxes 882 633
Provision for uncollectible accounts 362 290
Equity in earnings of affiliates (1,701) (1,253)
Other 66 696
Changes in operating assets
and liabilities, net of effect of
purchase transactions:
Accounts receivable (1,975) (228)
Other receivables 217 342
Other current assets (320) 700
Accounts payable (691) (485)
Accrued expenses 3,512 (213)
---------- ----------
Total adjustments 26,644 19,725
---------- ----------
Net cash provided by
operating activities $ 37,710 $ 25,295
========== ==========
See notes to consolidated financial statements
-7-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 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. Acquisition:
- -- ------------------
In October 1997, the Company purchased a 75% equity interest in an Illinois
company that primarily manufactures and refurbishes trailers for mobile medical
equipment. The purchase price was $4,761,000 in cash and the potential of up to
$1,050,000 to be paid in 1999 based on certain performance criteria in 1998. The
purchase was effective September 1, 1997. This acquisition was accounted for
using the purchase method of accounting.
Revenue from contracts for the manufacture or refurbishment of trailers is
recognized using the percentage of completion method.
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 nine months ended September 30, 1997, total revenues increased
$20,251,000 (40%) as compared to the same period in 1996. Revenues from
lithotripter operations increased by $20,107,000 primarily due to the
acquisition of (1) one lithotripter entity that owned or managed thirty-one
lithotripters throughout the U.S. effective May, 1996, (2) additional interest
in 10 partnerships in January 1997, (3) one company that owned two lithotripters
effective June 1997 and (4) 38.25% interest in a lithotripter unit effective May
1997. Revenues from trailer operations were $401,000. (See Subsequent Events
note on page 8.)Revenues from cardiac centers decreased $271,000 primarily due
to one sold cardiac center.
For the three months ended September 30, 1997, total revenues increased
$2,061,000 (8%) as compared to the same period in 1996. Revenues from
lithotripter operations increased by $1,727,000 primarily due to the
acquisitions discussed above. Revenues from trailer operations were $401,000.
(See Subsequent Events note on page 8.)
Expenses
- --------
For the nine months ended September 30, 1997, costs and expenses increased from
33% to 34% of revenues, and increased $6,934,000 (41%) in absolute terms,
compared to the same period in 1996. Costs of services associated with
lithotripter operations increased $5,829,000 (45%) in absolute terms and from
26% to 27% of lithotripter revenues primarily due to the acquisitions discussed
above. Expenses from trailer operations were $345,000. (See Subsequent Events
note on page 8.) Cost of services associated with cardiac centers decreased
$245,000 (50%) primarily due to one sold cardiac center. Corporate expenses
decreased from 7% to 6% of revenues as the Company was able to successfully grow
without proportionately adding overhead. Corporate expenses increased $889,000
(27%) 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, 1997, costs and expenses remained at
32% of revenues, but increased $574,000 (7%) in absolute terms, compared to the
same period in 1996. Costs of services associated with lithotripter operations
increased $183,000 (3%) in absolute terms for the reasons described above and
decreased from 26% to 25% of lithotripter revenues . Expenses from trailer
operations were $345,000. (See Subsequent Events note on page 8.) Cost of
services associated with cardiac centers decreased $82,000 (51%) primarily due
to one sold cardiac center. Corporate expenses decreased from 6% to 5% of
revenues, and increased $12,000 (1%) in absolute terms, due to the reasons
discussed above.
Other Income (Deductions)
- -------------------------
For the nine months ended September 30, 1997, other deductions decreased
$1,878,000 primarily due to the 1996 other deductions total included $3,535,000
in loan fees and stock offering costs, which only $360,000 have been recorded in
1997, and offset by an interest expense increased $1,391,000 due to borrowings
in 1997 primarily related to the acquisitions discussed above.
For the three months ended September 30, 1997, other deductions increased
$42,000 primarily due to a decline in other, net, which represents nonrecurring
collections in 1996 on amounts that had been written off in 1995, offset by
additional interest income earned on short-term excess cash.
-9-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Cash was $18,792,000 and $20,096,000 at September 30, 1997 and December 31,
1996, respectively. Cash provided by operations for the nine months ended
September 30, 1997 was compared to cash provided by operations for the nine
months ended September 30, 1996 in the amount of .
Cash used in investing activities for the nine months ended September 30, 1997
was $15,707,000 compared to cash used in investing activities for the nine
months ended September 30, 1996 in the amount of $66,763,000. This was primarily
due to the acquisitions of lithotripter operations, discussed above, that
resulted in the net use of cash amounting to $15,335,000 for the nine months
ended September 30, 1997 and $63,884,000 for the nine months ended September 30,
1996.
Cash used in financing activities for the nine months ended September 30,
1997 was $23,307,000, primarily due to distributions to minority interest of
$27,728,000 offset by $50,959,000 in new borrowings due to an increase in the
Company's credit facility in the first quarter of 1997 less $47,696,000 in
payments on notes payable. on notes payable. Cash provided by financing
activities for the nine months ended September 30, 1996 was $47,232,000, which
included $72,000,000 in new borrowings for the acquisition effective May 1996,
offset by $12,409,000 in distributions to minority interest and $12,696,000 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
availablity on its current senior credit facility.
-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
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: November 3, 1997 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, 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 $4,520 $4,520
======= =======
Average number of shares issued & outstanding 19,299 19,299
Average stock option and warrant shares 267 327
------- -------
Shares for earnings calculation 19,566 19,626
======= =======
Net income per share $0.23 $0.23
======= =======
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
======= =======
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, 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 $11,066 $11,066
======= =======
Average number of shares
issued & outstanding 19,265 19,265
Average stock option and warrant shares 285 348
------- -------
Shares for earnings calculation 19,550 19,613
====== ======
Net income per share $ 0.57 $ 0.56
====== ======
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
====== ======
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, 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 9-Mos
<FISCAL-YEAR-END> Dec-31-1997 Dec-31-1997
<PERIOD-START> Jul-01-1997 Jan-01-1997
<PERIOD-END> Sep-30-1997 Sep-30-1997
<CASH> 18,792 18,792
<SECURITIES> 0 0
<RECEIVABLES> 18,271 18,271
<ALLOWANCES> 801 801
<INVENTORY> 0 0
<CURRENT-ASSETS> 41,240 41,240
<PP&E> 24,401 24,401
<DEPRECIATION> 10,029 10,029
<TOTAL-ASSETS> 215,054 215,054
<CURRENT-LIABILITIES> 30,025 30,025
<BONDS> 0 0
0 0
0 0
<COMMON> 193 193
<OTHER-SE> 88,138 88,138
<TOTAL-LIABILITY-AND-EQUITY> 215,054 215,054
<SALES> 401 401
<TOTAL-REVENUES> 26,361 70,470
<CGS> 345 345
<TOTAL-COSTS> 8,377 23,701
<OTHER-EXPENSES> 2,129 6,277
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,859 5,602
<INCOME-PRETAX> 6,446 15,093
<INCOME-TAX> 1,926 4,027
<INCOME-CONTINUING> 4,520 11,066
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,520 11,066
<EPS-PRIMARY> 0.23 0.57
<EPS-DILUTED> 0.23 0.56
</TABLE>
