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 March 31, 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 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 stock, as of the latest practicable date.
Number of Shares Outstanding at
Title of Each Class April 28, 1997
------------------- -------------------------------
Common Stock, $.01 par value 19,270,267
<PAGE>
PART I
FINANCIAL INFORMATION
-2-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($ in thousands, except per share data)
Three Months Ended
March 31,
---------------------------------
1997 1996
--------------- ---------------
Fee revenue:
Lithotripsy:
Fee revenues $ 19,089 $ 6,069
Management fees 1,351 554
Equity income 320 379
--------------- ---------------
20,760 7,002
Cardiac 129 222
--------------- ---------------
20,889 7,224
--------------- ---------------
Costs and expenses:
Cost of services and general
and administrative expense
Lithotripsy 5,798 2,263
Cardiac 92 159
Corporate 1,362 599
--------------- ---------------
7,252 3,021
Depreciation and amortization 2,084 1,149
--------------- ---------------
9,336 4,170
--------------- ---------------
Operating income 11,553 3,054
Other income (deductions):
Interest and dividends 139 22
Financing costs (360) --
Interest expense (1,764) (509)
Other, net 103 80
--------------- ---------------
(1,882) (407)
--------------- ---------------
Income before provision for income taxes
and minority interest 9,671 2,647
Minority interest in consolidated income 5,865 477
Provision for income taxes 930 264
--------------- ---------------
Net income $ 2,876 $ 1,906
=============== ===============
Primary earnings per share:
Net income $ 0.15 $ 0.12
=============== ===============
Weighted average shares outstanding 19,498 16,366
=============== ===============
Fully diluted earnings per share:
Net income $ 0.15 $ 0.12
=============== ===============
Weighted average shares outstanding 19,498 17,368
=============== ===============
See notes to consolidated financial statements.
-3-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
March 31, December 31,
1997 1996
---- ----
ASSETS
Current assets:
Cash $ 16,280 $ 20,096
Accounts receivable, less allowance
for doubtful accounts of $512 in
1997 and $335 in 1996 15,697 16,346
Other receivables 1,923 1,842
Deferred income taxes 948 948
Prepaid expenses and other current assets 795 841
--------------- ---------------
Total current assets 35,643 40,073
Property and equipment:
Equipment, furniture and fixtures 22,515 22,339
Leasehold improvements 113 113
--------------- ---------------
22,628 22,452
Less accumulated depreciation and
amortization (8,124) (7,122)
--------------- ---------------
Property and equipment, net 14,504 15,330
Investment in American Physicians
Service Group, Inc. 173 173
Other investments 7,829 7,927
Goodwill, at cost, net of amortization 140,656 132,302
Other noncurrent assets 2,082 1,948
--------------- ---------------
$ 200,887 $ 197,753
=============== ===============
See accompanying notes to consolidated financial statements.
4
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
($ in thousands)
March 31, December 31,
1997 1996
---- ----
LIABILITIES:
Current Liabilities:
Current portion of long-term debt $ 10,524 $ 10,522
Accounts payable 3,263 4,451
Accrued expenses 10,218 16,582
--------------- ---------------
Total current liabilities 24,005 31,555
Long-term debt, net of current portion 78,817 70,910
Deferred income taxes 5,736 5,423
--------------- ---------------
Total liabilities 108,558 107,888
Minority interest 12,391 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;
19,260,267 issued in 1997 and
19,078,933 issued in 1996 193 191
Capital in excess of par value 83,904 83,271
Accumulated deficit (4,159) (7,035)
--------------- ---------------
Total stockholders' equity 79,938 76,427
--------------- ---------------
$ 200,887 $ 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)
Three Months Ended
March 31,
1997 1996
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $ 21,322 $ 7,457
Cash paid to employees, suppliers
of goods and others (9,166) (3,676)
Interest received 139 22
Interest paid (2,174) (505)
Income taxes paid (625) (226)
--------------- ---------------
Net cash provided by
operating activities 9,496 3,072
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on lithotripter
entities acquired (10,503) (3,387)
Purchase of equipment and
leasehold improvements (216) (229)
Distributions from investments 557 646
Purchase of investments (129) --
Other (141) (101)
--------------- ---------------
Net cash (used in)
investing activities (10,432) (3,071)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 50,000 --
Payments on notes payable,
exclusive of interest (42,091) (1,138)
Distributions to minority interest (11,040) (369)
Exercise of stock options 251 130
--------------- ---------------
Net cash (used in)
financing activities (2,880) (1,377)
--------------- ---------------
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS (3,816) (1,376)
Cash and cash equivalents,
beginning of period 20,096 4,692
--------------- ---------------
Cash and cash equivalents,
end of period $ 16,280 $ 3,316
=============== ===============
See notes to consolidated financial statements
-6-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
Three Months Ended
March 31,
1997 1996
--------------- ---------------
Reconciliation of net income to
cash provided by operating activities
Net income $ 2,876 $ 1,906
Adjustments to reconcile net income
to cashprovided by operating activities:
Minority interest in
consolidated income 5,865 477
Depreciation and amortization 2,084 1,150
Provision for deferred income taxes 313 --
Provision for uncollectible accounts 60 35
Equity in earnings of affiliates (321) (382)
Other 39 --
Changes in operating assets and liabilities,
net of effect of purchase transactions:
Accounts receivable 589 499
Other receivables (80) (139)
Other current assets 46 206
Accounts payable (1,187) (301)
Accrued expenses (788) (379)
--------------- ---------------
Total adjustments 6,620 1,166
--------------- ---------------
Net cash provided by
operating activities $ 9,496 $ 3,072
=============== ===============
See notes to consolidated financial statements
-7-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 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. Noncash Investing and Financing Activities:
-------------------------------------------
In March 1997, The Company increased its credit facility by $45 million. The $40
million term loan was funded, and $37,750,000 was used to repay the line of
credit. Loan fees of $585,000 associated with the credit facility increase were
expensed in March 1997 on the consolidated statements of operations.
Additional paid in capital was increased and current federal income tax payable
was decreased by $383,000 related to the permanent tax difference arising from
the exercise of stock options in the quarter ended March 31, 1997.
-8-
<PAGE>
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
---------------------
Results of Operations
- ---------------------
Revenues
- --------
Total revenues for the three months ended March 31, 1997 increased
$13,665,000 (189%) as compared to the same period in 1996. Revenues from
lithotripter operations increased by $13,758,000 primarily due to the
acquisition of an entity that owned or managed 31 lithotripters effective May 1,
1996. Revenues from cardiac centers decreased $93,000 primarily due to one
discontinued/sold cardiac center.
Expenses
- --------
Costs and expenses for the three months ended March 31, 1997 decreased
from 42% to 35% of revenues, but increased $4,231,000 (140%) in absolute terms,
compared to the same period in 1996. Costs of services associated with
lithotripter operations increased $3,535,000 (156%) in absolute terms but
decreased from 32% to 28% of lithotripter revenues primarily due to the
acquisition discussed above. Cost of services associated with cardiac centers
decreased $67,000 (42%) primarily due to one sold cardiac center. Corporate
expenses were decreased from 8% to 7% of revenues as the Company was able to
successfully grow without proportionately adding overhead.. Corporate expenses
increased $763,000 (127%) 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.
Other Income (Deductions)
- -------------------------
Other deductions for the three months ended March 31, 1997 increased
$1,475,000 compared to the same period in 1996, primarily due to interest
expense increased $1,255,000 due to $74,000,000 in new borrowings in 1996
primarily for the acquisition of Lithotripters, Inc. effective May 1, 1996. The
Company expensed $360,000 in loan fees associated with the increase in the
credit facility in the quarter ended March 31, 1997.
Minority Interest In Consolidated Income
- ----------------------------------------
Minority interest in consolidated income for the three months ended
March 31, 1997 increased $5,388,000 compared to the same period in 1996,
primarily due to the minority interest associated with the 21 partnerships in
which Lithotripters, Inc. holds a controlling interest. The Company acquired all
of the stock of Lithotripters, Inc.
effective May 1, 1996.
Liquidity and Capital Resources
- -------------------------------
Cash was $16,280,000 and $20,096,000 at March 31, 1997 and December 31,
1996, respectively. Cash provided by operations for the quarter ended March 31,
1997 was $9,496,000 compared to cash provided by operations for the quarter
ended March 31, 1996 in the amount of $3,072,000.
-9-
<PAGE>
Liquidity and Capital Resources (continued)
- -------------------------------
Cash used in investing activities for the quarter ended March 31, 1997 was
$10,432,000 compared to cash used in investing activities for the quarter ended
March 31, 1996 in the amount of $3,071,000. The increase was attributable to
acquisition of additional partnership interests of $10,503,000 in January, 1997.
Cash used in financing activities for the quarter ended March 31, 1997 was
$2,880,000 which included $42,091,000 for payments on notes payable and
distributions to minority interest totaling $11,040,000, offset by $50,000,000
in new borrowings. Cash used in financing activities for the quarter ended March
31, 1996 was $1,377,000 which included $1,138,000 for payments on notes payable
and distributions to minority interest totaling $369,000.
The Company increased its credit facility by $45 million on March 31, 1997. The
total facility of $135 million consists of a $50 million revolving credit
facility due in April 2001, a $45 million term loan with quarterly principal
payments, and a $40 million term loan with annual principal payments of $800,000
and a balloon payment of $36 million in April 2003.
Management believes that its present cash position, together with funds
generated from operations, and from its available credit facility will provide
sufficient resources to meet the Company's cash requirements for current
operations and facilitate additional acquisitions.
-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: April 30, 1997 By: /s/ Cheryl L. Williams
------------------------
Cheryl L. Williams, Vice President
and Chief Financial Officer
-13-
<PAGE>
EXHIBIT 11
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 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 $ 2,876 $ 2,876
=============== ===============
Average number of shares
subscribed & outstanding 19,218 19,218
Average stock option shares 270 270
--------------- ---------------
Shares for earnings calculation 19,498 19,499
=============== ===============
Net income per share $ 0.15 $ 0.15
=============== ===============
1996
- ----
Net income applicable to common stock $ 1,906 $ 1,906
Adjustment: Add back interest expense
on convertible debt -- 101
--------------- ---------------
Adjusted net income applicable
to common stock $ 1,906 $ 2,007
=============== ===============
Average number of shares
subscribed & outstanding 14,754 14,754
Average stock option shares 1,612 1,713
Average convertible debt shares -- 901
--------------- ---------------
Shares for earnings calculation 16,366 17,368
=============== ===============
Net income per share $ 0.12 $ 0.12
=============== ===============
NOTE:
Primary and fully diluted income per share were computed by dividing net income
by the average number of shares outstanding plus the common stock equivalents,
which would arise from the exercise of dilutive stock options.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains Summary Financial Information extracted from the
March 31, 1997 Form 10-Q and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<CASH> 16,280
<SECURITIES> 0
<RECEIVABLES> 15,697
<ALLOWANCES> 512
<INVENTORY> 0
<CURRENT-ASSETS> 35,643
<PP&E> 22,628
<DEPRECIATION> 8,124
<TOTAL-ASSETS> 200,887
<CURRENT-LIABILITIES> 24,005
<BONDS> 0
0
0
<COMMON> 193
<OTHER-SE> 79,745
<TOTAL-LIABILITY-AND-EQUITY> 200,887
<SALES> 0
<TOTAL-REVENUES> 20,889
<CGS> 0
<TOTAL-COSTS> 7,252
<OTHER-EXPENSES> 2,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,764
<INCOME-PRETAX> 3,806
<INCOME-TAX> 930
<INCOME-CONTINUING> 2,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,876
<EPS-PRIMARY> $0.15
<EPS-DILUTED> $0.15
</TABLE>
