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, 1999
[ ] 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 October 31, 1999
Common Stock, $.01 par value 16,567,967
<PAGE>
PART I
FINANCIAL INFORMATION
-2-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
($ in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------- ------- ------- -------
Fee revenue:
Lithotripsy:
Fee revenues $21,647 $23,053 $62,720 $62,598
Management fees 1,403 1,444 4,165 3,797
Equity income 756 727 1,919 1,977
------- ------- ------- -------
23,806 25,224 68,804 68,372
Manufacturing 5,375 3,313 13,248 7,474
Refractive 987 -- 987 --
Prostatherapy 406 344 1,409 651
Cardiac 58 55 174 263
------- ------- ------- -------
Total fee revenue 30,632 28,936 84,622 76,760
------- ------- ------- -------
Costs and expenses:
Cost of services and general
and administrative expense
Lithotripsy 5,385 6,282 17,225 17,456
Manufacturing 4,242 2,993 10,038 6,150
Refractive 529 -- 529 --
Prostatherapy 332 259 1,160 528
Cardiac 54 49 173 197
Corporate 1,375 1,328 3,603 3,979
Nonrecurring development and
other costs -- -- -- 1,617
------- ------- ------- -------
11,917 10,911 32,728 29,927
Depreciation and amortization 2,784 2,567 7,812 7,740
------- ------- ------- -------
14,701 13,478 40,540 37,667
------- ------- ------- -------
Operating income 15,931 15,458 44,082 39,093
Other income (deductions):
Interest income 466 564 1,204 1,150
Interest expense (2,356) (2,312) (7,010) (6,426)
Financing costs -- -- -- (4,982)
Release of contractual obligation -- -- 1,140 --
Other, net 61 (147) (230) 185
------- ------- ------- -------
(1,829) (1,895) (4,896) (10,073)
------- ------- ------- -------
Income before provision for income taxes
and minority interest 14,102 13,563 39,186 29,020
Minority interest in consolidated income 6,872 7,036 19,516 18,069
Provision for income taxes 2,891 2,586 7,867 4,661
------- ------- ------- -------
Net income $4,339 $3,941 $11,803 $6,290
======= ======= ======= =======
Basic earnings per share:
Net income $0.26 $0.21 $0.69 $0.33
======= ======= ======= =======
Weighted average shares outstanding 16,818 18,437 17,096 18,943
======= ======= ======= =======
Diluted earnings per share:
Net income $0.26 $0.21 $0.69 $0.33
======= ======= ======= =======
Weighted average shares outstanding 17,000 18,561 17,225 19,084
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in thousands)
<TABLE>
<S> <C> <C>
September 30, December 31,
1999 1998
-------- --------
ASSETS
Current assets:
Cash $21,001 $40,146
Accounts receivable, less allowance
for doubtful accounts of $109 in
1999 and $966 in 1998 26,500 22,321
Other receivables 2,174 2,228
Deferred income taxes 1,432 2,330
Prepaid expenses and other current assets 3,759 2,774
-------- --------
Total current assets 54,866 69,799
-------- --------
Property and equipment:
Equipment, furniture and fixtures 41,211 34,485
Building and leasehold improvements 2,081 2,073
-------- --------
43,292 36,558
Less accumulated depreciation and
amortization (23,250) (18,471)
-------- --------
Property and equipment, net 20,042 18,087
Other investments 19,851 11,491
Goodwill, at cost, net of amortization 148,530 140,863
Other noncurrent assets 2,774 879
-------- --------
$246,063 $241,119
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in thousands)
<TABLE>
<S> <C> <C>
September 30, December 31,
1999 1998
-------- --------
LIABILITIES:
Current liabilities:
Current portion of long-term debt $1,499 $890
Accounts payable 3,107 6,208
Accrued distributions to minority interests 55 8,951
Accrued expenses 12,049 12,051
-------- --------
Total current liabilities 16,710 28,100
Long-term debt, net of current portion 103,385 100,987
Deferred income taxes 6,841 4,789
-------- --------
Total liabilities 126,936 133,876
Minority interest 23,957 17,493
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
1,000,000 shares authorized;
none outstanding -- --
Common stock, $.01 par value,
40,000,000 shares authorized;
19,359,267 issued in 1999 and
19,350,267 issued in 1998 194 194
Capital in excess of par value 87,567 87,380
Accumulated earnings 30,416 18,615
Treasury stock, at cost, 2,690,300 in 1999
and 1,845,200 in 1998 (23,007) (16,439)
-------- --------
Total stockholders' equity 95,170 89,750
-------- --------
$246,063 $241,119
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
<TABLE>
<S> <C> <C>
Nine Months Ended
September 30,
1999 1998
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $79,882 $72,755
Cash paid to employees, suppliers
of goods and others (39,725) (33,919)
Interest received 1,204 1,150
Interest paid (4,801) (7,001)
Income taxes paid (4,811) (5,676)
-------- --------
Net cash provided by
operating activities 31,749 27,309
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and
leasehold improvements (4,787) (3,643)
Distributions from investments 2,062 2,336
Purchase of investments and entities (21,293) (408)
Other 564 293
-------- --------
Net cash used in
investing activities (23,454) (1,422)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 3,673 100,025
Payments on notes payable, exclusive of interest (1,078) (80,392)
Distributions to minority interest (25,685) (24,892)
Contributions by minority interest 2,138 --
Purchase of treasury stock (6,567) (11,905)
Exercise of stock options 79 70
-------- --------
Net cash used in financing activities (27,440) (17,094)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (19,145) 8,793
Cash and cash equivalents, beginning of period 40,146 23,770
-------- --------
Cash and cash equivalents, end of period $21,001 $32,563
======== ========
</TABLE>
See notes to consolidated financial statements
-6-
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
<TABLE>
<S> <C> <C>
Nine Months Ended
September 30,
1999 1998
-------- --------
Reconciliation of net income to
cash provided by operating activities
Net income $11,803 $6,290
Adjustments to reconcile net income to
cash provided by operating activities:
Minority interest in consolidated income 19,516 18,069
Depreciation and amortization 7,812 7,740
Provision (benefit) for deferred income taxes 2,950 (785)
Equity in earnings of affiliates (2,032) (1,977)
Provision for uncollectible accounts (926) --
Other (75) 20
Changes in operating assets and liabilities,
net of effect of purchase transactions:
Accounts receivable (2,529) (2,032)
Other receivables (514) (1,192)
Other current assets (630) (1,022)
Accounts payable (3,358) 4,491
Accrued expenses (268) (2,293)
-------- --------
Total adjustments 19,946 21,019
-------- --------
Net cash provided by
operating activities $31,749 $27,309
======== ========
</TABLE>
See notes to consolidated financial statements
-7-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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, 1998 and reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
financial position as of September 30, 1999 and the results of operations for
the periods presented. These statements have not been audited 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, 1998 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 September 1, 1999 the Company purchased a 60% interest in two laser
(refractive) surgery centers operated by Barnet Dulaney Eye Center for
approximately $8,807,000 in cash and 29,000 warrants, plus an earnout to be paid
at the end of the first year of operations after the acquisition. This
investment is accounted for using the equity method.
Effective September 1, 1999 the Company acquired, through a majority owned
acquisition subsidiary, 60% of the outstanding stock of Horizon Vision Centers,
Inc. (Horizon). Horizon operates four laser (refractive) surgery centers in
California. The Company paid approximately $10,866,000 in cash for this
acquisition and has accounted for the transaction using the purchase method of
accounting.
3. Earnings per share
- -- ------------------
Basic earnings per share ("EPS") is based on weighted average shares outstanding
without any dilutive effects considered. Diluted EPS reflects dilution from all
contingently issuable shares, including options and warrants. A reconciliation
of such EPS data is as follows:
<TABLE>
<S> <C> <C>
Basic Diluted
earnings earnings
Nine Months Ended September 30, 1999 per share per share
--------- ---------
( in thousands, except per share data)
Net income $11,803 $11,803
======== ========
Average number of shares outstanding 17,096 17,096
Effect of contingently issuable shares -- 129
-------- --------
Shares for EPS calculation 17,096 17,225
======== ========
Net income per share $0.69 $0.69
======== ========
</TABLE>
-8-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
3. Earnings per share, continued
- -- -----------------------------
<TABLE>
<S> <C> <C>
Basic Diluted
earnings earnings
Nine Months Ended September 30, 1998 per share per share
--------- ---------
($ in thousands, except per share data)
Net income $6,290 $6,290
======== ========
Average number of shares outstanding 18,943 18,943
Effect of contingently issuable shares -- 141
-------- --------
Shares for EPS calculation 18,943 19,084
======== ========
Net income per share $0.33 $0.33
======== ========
Three Months Ended September 30, 1999
Net income $4,339 $4,339
======== ========
Average number of shares outstanding 16,818 16,818
Effect of contingently issuable shares -- 182
-------- --------
Shares for EPS calculation 16,818 17,000
======== ========
Net income per share $0.26 $0.26
======== ========
Three Months Ended September 30, 1998
Net income $3,941 $3,941
======== ========
Average number of shares outstanding 18,437 18,437
Effect of contingently issuable shares -- 124
-------- --------
Shares for EPS calculation 18,437 18,561
======== ========
Net income per share $0.21 $0.21
======== ========
</TABLE>
Unexercised stock options and warrants to purchase 1,107,000 and 1,397,000
shares of the Company's common stock as of September 30, 1999 and 1998 were not
included in the computation of diluted EPS because the effect would be
antidilutive.
4. Segment Reporting
- -- -----------------
The Company has two reportable segments: Medical, which includes lithotripsy,
prostatherapy, refractive and cardiac rehabilitation, and Manufacturing.
Lithotripsy and prostatherapy provide services related to the operation of the
lithotripters and prostatherapy units, including scheduling, staffing, training,
quality assurance, maintenance, regulatory compliance and contracting with
payors, hospitals and surgery centers; refractive provides services related to
the operations of refractive vision correction centers; and cardiac
rehabilitation provides non-medical management services for several cardiac
rehabilitation centers pursuant to agreements with physicians, clinics and
hospitals. The manufacturing segment provides manufacturing services,
installation, upgrade, refurbishment and repair of major medical equipment for
mobile medical service providers.
-9-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
4. Segment Reporting, continued
- -------------------------------
The Company measures performance based on the pretax income or loss from its
operating segments, which do not include unallocated corporate general and
administrative expenses and corporate interest revenue and expense.
<TABLE>
<S> <C> <C> <C> <C>
($ in thousands) Nine Months Ended Nine Months Ended Nine Months Ended Nine Months Ended
September 30, 1999 September 30, 1999 September 30, 1998 September 30, 1998
------------------ ------------------ ------------------ ------------------
Medical Manufacturing Medical Manufacturing
------- ------------- ------- -------------
Revenue from
external customers $71,374 $13,248 $69,286 $7,474
Intersegment
revenues - 286 - 223
Segment profit 26,469 2,470 26,478 1,111
</TABLE>
The following is a reconciliation of the measure of segment profit per above to
consolidated income before income taxes per the consolidated statements of
income:
<TABLE>
<S> <C> <C>
Nine months ended September 30,
1999 1998
------- -------
($ in thousands)
Total segment profit $28,939 $27,589
Unallocated corporate expenses:
General and administrative expenses (3,603) (3,756)
Net interest expense (5,772) (5,428)
Financing costs - (4,982)
Nonrecurring development and other costs - (1,617)
Release of contractual obligation 1,140 -
Other, net (1,034) (855)
------- -------
Income before income taxes $19,670 $10,951
======= =======
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
($ in thousands) Three Months Ended Three Months Ended Three Months Ended Three Months Ended
September 30, 1999 September 30, 1999 September 30, 1998 September 30, 1998
------------------ ------------------ ------------------ ------------------
Medical Manufacturing Medical Manufacturing
------- ------------- ------- -------------
Revenue from
external customers $25,257 $5,375 $25,623 $3,313
Intersegment
revenues - 138 - 13
Segment profit 9,599 1,027 9,757 213
</TABLE>
-10-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
4. Segment Reporting, continued
- -- ----------------------------
The following is a reconciliation of the measure of segment profit per above to
consolidated income before income taxes per the consolidated statements of
income:
<TABLE>
<S> <C> <C>
Three months ended September 30,
1999 1998
------- -------
($ in thousands)
Total segment profit $10,626 $9,970
Unallocated corporate expenses:
General and administrative expenses (1,375) (1,328)
Net interest expense (1,847) (1,793)
Other, net (174) (322)
------- -------
Income before income taxes $7,230 $6,527
======= =======
</TABLE>
5. Condensed Financial Information Regarding Guarantor Subsidiaries
- -- ----------------------------------------------------------------
Condensed consolidating financial information regarding the Company, Guarantor
Subsidiaries and Non-guarantor Subsidiaries for September 30, 1999 and 1998 is
presented below for purposes of complying with the reporting requirements of the
Guarantor Subsidiaries. Separate financial statements and other disclosures
concerning each Guarantor Subsidiary have not been presented because management
has determined that such information is not material to investors. The Guarantor
Subsidiaries are wholly-owned subsidiaries of the Company who have fully and
unconditionally guaranteed the 8.75% unsecured senior subordinated Notes.
-11-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Condensed Financial Information Regarding Guarantor Subsidiaries, continued
- -- ---------------------------------------------------------------------------
Condensed Consolidating Statement of Income
<TABLE>
<S> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1999
($ in thousands)
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
Services Inc. Subsidiaries Subsidiaries Entries Total
Fee revenue:
Lithotripsy:
Fee revenues $ -- $ 16,060 $ 46,660 $ -- $ 62,720
Management fees -- 2,552 1,613 -- 4,165
Equity income 26,289 14,538 -- (38,908) 1,919
---------- ---------- ---------- ---------- ----------
26,289 33,150 48,273 (38,908) 68,804
Manufacturing -- -- 13,248 -- 13,248
Refractive 152 114 873 (152) 987
Prostatherapy -- -- 1,409 -- 1,409
Cardiac -- 174 -- -- 174
---------- ---------- ---------- ---------- ----------
Total revenues 26,441 33,438 63,803 (39,060) 84,622
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Cost of services and general and
administrative expenses:
Lithotripsy -- 1,388 15,837 -- 17,225
Manufacturing -- -- 10,038 -- 10,038
Refractive -- -- 529 -- 529
Prostatherapy -- -- 1,160 -- 1,160
Cardiac -- 173 -- -- 173
Corporate 210 3,393 -- -- 3,603
---------- ---------- ---------- ---------- ----------
Total costs and expenses 210 4,954 27,564 -- 32,728
Depreciation and amortization 5 3,825 3,982 -- 7,812
---------- ---------- ---------- ---------- ----------
215 8,779 31,546 -- 40,540
---------- ---------- ---------- ---------- ----------
Operating income 26,226 24,659 32,257 (39,060) 44,082
---------- ---------- ---------- ---------- ----------
Other income (deductions):
Interest income 599 449 156 -- 1,204
Interest expense (6,838) 27 (199) -- (7,010)
Release of contractual obligation -- 1,140 -- -- 1,140
Other, net (694) 439 25 -- (230)
---------- ---------- ---------- ---------- ----------
Total other income
(deductions) (6,933) 2,055 (18) -- (4,896)
Income before provision for income
taxes and minority interest 19,293 26,714 32,239 (39,060) 39,186
Minority interest in consolidated
income -- -- -- 19,516 19,516
Provision for income taxes 7,490 273 104 -- 7,867
---------- ---------- ---------- ---------- ----------
Net income $ 11,803 $ 26,441 $ 32,135 $(58,576) $ 11,803
========== ========== ========== ========== ==========
</TABLE>
-12-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Condensed Financial Information Regarding Guarantor Subsidiaries, continued
- -- ---------------------------------------------------------------------------
Condensed Consolidating Statement of Income
<TABLE>
<S> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1998
($ in thousands)
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
Services Inc. Subsidiaries Subsidiaries Entries Total
Fee revenue:
Lithotripsy:
Fee revenues $ -- $ 16,473 $46,125 $ -- $ 62,598
Management fees -- 2,139 1,658 -- 3,797
Equity income 22,375 14,478 -- (34,876) 1,977
---------- ---------- ---------- ---------- ----------
22,375 33,090 47,783 (34,876) 68,372
Manufacturing -- -- 7,474 -- 7,474
Prostatherapy -- -- 651 -- 651
Cardiac -- 263 -- -- 263
---------- ---------- ---------- ---------- ----------
Total revenues 22,375 33,353 55,908 (34,876) 76,760
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Cost of services and general and
administrative expenses:
Lithotripsy -- 2,604 14,852 -- 17,456
Manufacturing -- -- 6,150 -- 6,150
Prostatherapy -- -- 528 -- 528
Cardiac -- 197 -- -- 197
Corporate 149 3,830 -- -- 3,979
Nonrecurring development
and other costs 1,617 -- -- -- 1,617
---------- ---------- ---------- ---------- ----------
Total costs and expenses 1,766 6,631 21,530 -- 29,927
Depreciation and amortization 5 3,877 3,858 -- 7,740
---------- ---------- ---------- ---------- ----------
Operating income 20,604 22,845 30,520 (34,876) 39,093
---------- ---------- ---------- ---------- ----------
Other income (deductions):
Interest income 507 359 284 -- 1,150
Interest expense (6,259) (5) (162) -- (6,426)
Financing costs (4,982) -- -- -- (4,982)
Other, net (135) 319 1 -- 185
---------- ---------- ---------- ---------- ----------
Total other income
(deductions) (10,869) 673 123 -- (10,073)
Income before provision for income
taxes and minority interest 9,735 23,518 30,643 (34,876) 29,020
Minority interest in consolidated
income -- -- -- 18,069 18,069
Provision for income taxes 3,445 1,143 73 -- 4,661
---------- ---------- ---------- ---------- ----------
Net income $ 6,290 $ 22,375 $30,570 $ (52,945) $ 6,290
========== ========== ========== ========== ==========
</TABLE>
-13-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Condensed Financial Information Regarding Guarantor Subsidiaries, continued
- -- ---------------------------------------------------------------------------
Condensed Consolidating Statement of Income
<TABLE>
<S> <C> <C> <C> <C> <C>
Three Months Ended September 30, 1999
($ in thousands)
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
Services Inc. Subsidiaries Subsidiaries Entries Total
Fee revenue:
Lithotripsy:
Fee revenues $ -- $ 6,161 $ 15,486 $ -- $ 21,647
Management fees -- 827 576 -- 1,403
Equity income 9,002 4,818 -- (13,064) 756
---------- ---------- ---------- ---------- ----------
9,002 11,806 16,062 (13,064) 23,806
Manufacturing -- -- 5,375 -- 5,375
Refractive 152 114 873 (152) 987
Prostatherapy -- -- 406 -- 406
Cardiac -- 58 -- -- 58
---------- ---------- ---------- ---------- ----------
Total revenues 9,154 11,978 22,716 (13,216) 30,632
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Cost of services and general and
administrative expenses:
Lithotripsy -- 253 5,132 -- 5,385
Manufacturing -- -- 4,242 -- 4,242
Refractive -- -- 529 -- 529
Prostatherapy -- -- 332 -- 332
Cardiac -- 54 -- -- 54
Corporate 64 1,311 -- -- 1,375
---------- ---------- ---------- ---------- ----------
Total costs and expenses 64 1,618 10,235 -- 11,917
Depreciation and amortization 2 1,389 1,393 -- 2,784
---------- ---------- ---------- ---------- ----------
66 3,007 11,628 -- 14,701
Operating income 9,088 8,971 11,088 (13,216) 15,931
---------- ---------- ---------- ---------- ----------
Other income (deductions):
Interest income 247 169 50 -- 466
Interest expense (2,284) 27 (99) -- (2,356)
Other, net 33 22 6 -- 61
---------- ---------- ---------- ---------- ----------
Total other income
(deductions) (2,004) 218 (43) -- (1,829)
Income before provision for income
taxes and minority interest 7,084 9,189 11,045 (13,216) 14,102
Minority interest in consolidated
income -- -- -- 6,872 6,872
Provision for income taxes 2,745 35 111 -- 2,891
---------- ---------- ---------- ---------- ----------
Net income $ 4,339 $ 9,154 $ 10,934 $ (20,088) $ 4,339
========== ========== ========== ========== ==========
</TABLE>
-14-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Condensed Financial Information Regarding Guarantor Subsidiaries, continued
- -- ---------------------------------------------------------------------------
Condensed Consolidating Statement of Income
<TABLE>
<S> <C> <C> <C> <C> <C>
Three Months Ended September 30, 1998
($ in thousands)
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
Services Inc. Subsidiaries Subsidiaries Entries Total
Fee revenue:
Lithotripsy:
Fee revenues $ -- $ 5,866 $ 17,187 $ -- $ 23,053
Management fees -- 777 667 -- 1,444
Equity income 8,312 5,506 -- (13,091) 727
---------- ---------- ---------- ---------- ----------
8,312 12,149 17,854 (13,091) 25,224
Manufacturing -- -- 3,313 -- 3,313
Prostatherapy -- -- 344 -- 344
Cardiac -- 55 -- -- 55
---------- ---------- ---------- ---------- ----------
Total revenues 8,312 12,204 21,511 (13,091) 28,936
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Cost of services and general and
administrative expenses:
Lithotripsy -- 1,136 5,146 -- 6,282
Manufacturing -- -- 2,993 -- 2,993
Prostatherapy -- -- 259 -- 259
Cardiac -- 49 -- -- 49
Corporate 74 1,254 -- -- 1,328
---------- ---------- ---------- ---------- ----------
Total costs and expenses 74 2,439 8,398 -- 10,911
Depreciation and amortization 2 1,257 1,308 -- 2,567
---------- ---------- ---------- ---------- ----------
76 3,696 9,706 -- 13,478
---------- ---------- ---------- ---------- ----------
Operating income 8,236 8,508 11,805 (13,091) 15,458
---------- ---------- ---------- ---------- ----------
Other income (deductions):
Interest income 254 233 77 -- 564
Interest expense (2,267) (2) (43) -- (2,312)
Other, net (138) (9) -- -- (147)
---------- ---------- ---------- ---------- ----------
Total other income
(deductions) (2,151) 222 34 -- (1,895)
Income before provision for
income taxes and minority interest 6,085 8,730 11,839 (13,091) 13,563
Minority interest in consolidated
income -- -- -- 7,036 7,036
Provision for income taxes 2,144 418 24 -- 2,586
---------- ---------- ---------- ---------- ----------
Net income $ 3,941 $ 8,312 $ 11,815 $ (20,127) $ 3,941
========== ========== ========== ========== ==========
</TABLE>
-15-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Condensed Financial Information Regarding Guarantor Subsidiaries, continued
- -- ---------------------------------------------------------------------------
Condensed Consolidating Balance Sheet
<TABLE>
<S> <C> <C> <C> <C> <C>
($ in thousands) September 30, 1999
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
Services, Inc. Subsidiaries Subsidiaries Entries Total
ASSETS:
Current assets:
Cash $ 5,996 $ 7,009 $ 7,996 $ -- $ 21,001
Accounts receivable, net -- 4,091 22,409 -- 26,500
Other receivables -- 2,174 -- -- 2,174
Deferred income taxes 705 727 -- -- 1,432
Prepaid expenses and other current assets 28 393 3,338 -- 3,759
---------- ---------- ---------- ---------- ----------
Total current assets 6,729 14,394 33,743 -- 54,866
---------- ---------- ---------- ---------- ----------
Property and equipment:
Equipment, furniture and fixtures -- 5,515 35,696 -- 41,211
Building and leasehold improvements -- 499 1,582 -- 2,081
Less accumulated depreciation and amortization -- (4,675) (18,575) -- (23,250)
---------- ---------- ---------- ---------- ----------
Property and equipment, net -- 1,339 18,703 -- 20,042
Investment in subsidiaries and other
investments 187,992 39,751 -- (207,892) 19,851
Goodwill, at cost, net of amortization -- 139,860 8,670 -- 148,530
Other noncurrent assets 11,267 784 1,636 (10,913) 2,774
---------- ---------- ---------- ---------- ----------
Total assets $ 205,988 $ 196,128 $ 62,752 $ (218,805) $ 246,063
========== ========== ========== ========== ==========
LIABILITIES:
Current liabilities:
Current portion of long-term debt $ -- $ -- $ 1,499 $ -- $ 1,499
Accounts payable 540 1,277 1,290 -- 3,107
Accrued distributions to minority interests -- -- 55 -- 55
Accrued expenses 6,922 2,974 2,153 -- 12,049
---------- ---------- ---------- ---------- ----------
Total current liabilities 7,462 4,251 4,997 -- 16,710
Long-term debt, net of current portion 100,000 162 14,136 (10,913) 103,385
Deferred income taxes 3,356 3,485 -- -- 6,841
---------- ---------- ---------- ---------- ----------
Total liabilities 110,818 7,898 19,133 (10,913) 126,936
Minority interest -- -- -- 23,957 23,957
STOCKHOLDERS' EQUITY:
Common stock 194 -- -- -- 194
Capital in excess of par value 87,567 -- -- -- 87,567
Accumulated earnings 30,416 -- -- -- 30,416
Treasury stock (23,007) -- -- -- (23,007)
Subsidiary net equity -- 188,230 43,619 (231,849) --
---------- ---------- ---------- ---------- ----------
Total stockholders' equity 95,170 188,230 43,619 (231,849) 95,170
---------- ---------- ---------- ---------- ----------
Total liabilities and stockholders' equity $ 205,988 $ 196,128 $ 62,752 $ (218,805) $ 246,063
========== ========== ========== ========== ==========
</TABLE>
-16-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Condensed Financial Information Regarding Guarantor Subsidiaries, continued
- -- ---------------------------------------------------------------------------
Condensed Consolidating Statement of Cash Flows
<TABLE>
<S> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1999
($ in thousands) Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
Services, Inc. Subsidiaries Subsidiaries Entries Total
Net cash (used) provided by
operating activities $ (20,170) $ 10,447 $ 41,472 $ -- $ 31,749
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchases of equipment and leasehold
improvements -- (699) (4,088) -- (4,787)
Distributions from subsidiaries 16,856 15,495 -- (32,351) --
Distributions from investments -- 2,062 -- -- 2,062
Purchase of investments and entities -- (11,217) (10,076) -- (21,293)
Other -- 192 372 -- 564
---------- ---------- ---------- ---------- ----------
Net cash provided (used) by
investing activities 16,856 5,833 (13,792) (32,351) (23,454)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Borrowings on notes payable -- -- 3,673 -- 3,673
Payments on notes payable, exclusive of interest -- -- (1,078) -- (1,078)
Distribution to minority interest -- -- -- (25,685) (25,685)
Contributions by minority interest -- -- 2,138 -- 2,138
Purchase of treasury stock (6,567) -- -- -- (6,567)
Other 79 -- -- -- 79
Distributions to equity owners -- (16,856) (41,180) 58,036 --
---------- ---------- ---------- ---------- ----------
Net cash provided (used) by
financing activities (6,488) (16,856) (36,447) 32,351 (27,440)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents (9,802) (576) (8,767) -- (19,145)
Cash and cash equivalents at beginning
of period 15,798 7,585 16,763 -- 40,146
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of
period $ 5,996 $ 7,009 $ 7,996 $ -- $ 21,001
========== ========== ========== ========== ==========
</TABLE>
-17-
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Condensed Financial Information Regarding Guarantor Subsidiaries, continued
- -- ---------------------------------------------------------------------------
Condensed Consolidating Statement of Cash Flows
<TABLE>
<S> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1998
($ in thousands) Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
Services, Inc. Subsidiaries Subsidiaries Entries Total
Net cash (used) provided by
operating activities $ (15,563) $ 8,667 $ 34,205 $ -- $ 27,309
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchases of equipment and leasehold
improvements -- (670) (2,973) -- (3,643)
Distributions from subsidiaries 23,846 14,638 -- (38,484) --
Investments (408) 2,336 -- -- 1,928
Other 43 97 153 -- 293
---------- ---------- ---------- ---------- ----------
Net cash provided (used) by
investing activities 23,481 16,401 (2,820) (38,484) (1,422)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Payments on notes payable, exclusive of interest (79,000) (5) (1,387) -- (80,392)
Borrowings on notes payable 100,000 -- 25 -- 100,025
Distribution to minority interest -- -- -- (24,892) (24,892)
Purchase of treasury stock (11,905) -- -- -- (11,905)
Other 70 -- -- -- 70
Distributions to equity owners -- (23,846) (39,530) 63,376 --
---------- ---------- ---------- ---------- ----------
Net cash provided (used) by
financing activities 9,165 (23,851) (40,892) 38,484 (17,094)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents 17,083 1,217 (9,507) -- 8,793
Cash and cash equivalents at beginning
of period 18 6,260 17,492 -- 23,770
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of
period $ 17,101 $ 7,477 $ 7,985 $ -- $ 32,563
========== ========== ========== ========== ==========
</TABLE>
-18-
<PAGE>
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
Results of Operations
Revenues
- --------
For the nine months ended September 30, 1999, total revenues increased
$7,862,000 (10%) as compared to the same period in 1998. Revenues from
manufacturing increased $5,774,000 (77%) due to increased sales of MRI trailers
and sales of cath lab trailers. During 1998 the manufacturing facility became
certified by GE to provide trailers for GE MRI equipment. Revenues from
lithotripsy operations increased by $432,000 (1%) due to a slight increase in
procedures performed partially offset by a slight decrease in the average
reimbursement per procedure. Revenues from prostatherapy operations increased
$758,000 (116%) due to additional routes which were added during late 1998 and
early 1999. During the 3rd quarter the Company entered the refractive vision
correction (RVC) field through two acquisitions. As a result of these
acquisitions, the Company recognized refractive revenues of $987,000, including
equity income of $114,000.
Total revenues for the three months ended September 30, 1999 increased$1,696,000
(6%) as compared to the same period in 1998. Revenues from manufacturing
increased $2,062,000 (62%) and revenues from lithotripter operations decreased
by $1,418,000 (6%). In addition to a slight decrease in the average
reimbursement per procedure, procedure volume decreased for the three months
ended September 30, 1999 as compared to the same period in 1998. Revenues from
prostatherapy operations increased $62,000 (18%) because of additional routes
added during late 1998 and early 1999, partially offset by a decline in the
procedures performed by the North Carolina unit.
Expenses
- --------
For the nine months ended September 30, 1999, costs and expenses
(excluding depreciation and amortization) remained constant at 39% of revenues
and increased by $2,801,000 (9%) in absolute terms, primarily due to increased
activity in 1999 in prostatherapy operations and the manufacturing segment as
well as the addition of RVC operations, partially offset by certain nonrecurring
development and other costs incurred in 1998 of $1,617,000. Cost of services and
general and administrative expenses associated with manufacturing increased
$3,888,000 due to the increase in sales. Cost of services associated with
lithotripter operations decreased $231,000 (1%) in absolute terms as a result of
a decrease in repairs and maintenance expenses due to economies of scale offset
by increased lithotripsy operations. These expenses decreased from 26% to 25% of
lithotripter revenues. Corporate expenses decreased $376,000 (9%) and from 5% to
4% of revenues as the Company continues to successfully grow without
proportionately adding overhead.
Costs and expenses (excluding depreciation and amortization) for the three
months ended September 30, 1999 increased from 38% to 39% of revenues and
increased $1,006,000 (9%) in absolute terms, compared to the same period in
1998. This increase is primarily attributed to the growth in the manufacturing
segment and the Company's entrance into the RVC field, both of which have lower
margins as compared to lithotripsy operations. Cost of services and general and
administrative expenses associated with manufacturing increased $1,249,000 (42%)
due to the increase in sales of MRI trailers and sales of cath lab trailers.
Costs of services associated with lithotripter operations decreased $897,000
(14%) in absolute terms and decreased from 25% to 23% of lithotripter revenues.
Cost of services associated with prostatherapy operations increased $73,000
(28%) due to the additional routes discussed above. Corporate expenses remained
constant at 5% of revenues, while increasing $47,000 (4%) in absolute terms, as
the Company continues to successfully grow without proportionately adding
overhead.
-19-
<PAGE>
Other Income (Deductions)
- -------------------------
For the nine months ended September 30, 1999, other deductions decreased
$5,177,000 compared to the same period in 1998. This decrease is the result of
financing costs recognized in 1998 of $4,982,000 associated with the $100
million debt offering and the $50 million increase in the senior revolving
credit facility, as well as income recognition in 1999 of $1,140,000 due to the
release of a contractual obligation related to a management incentive
compensation program accrued at December 31, 1998. Interest expense increased
$584,000 (9%) due to the higher principal balances in 1999 related to the $100
million debt offering, which closed in March 1998. Interest income increased by
$54,000 (5%) resulting from higher cash balances. Other expenses increased
$415,000 primarily due to a write-off of costs related to a proposed acquisition
that was not consummated.
Other deductions for the three months ended September 30, 1999 decreased $66,000
compared to the same period in 1998. Interest income decreased $98,000 as cash
balances decreased this quarter as a result of the two RVC acquisitions and
interest expense increased $44,000 relating to new partnership debt for
equipment purchases.
Minority Interest In Consolidated Income
- ----------------------------------------
Minority interest in consolidated income for the nine months ended September 30,
1999 increased $1,447,000 compared to the same period in 1998, primarily due to
an increase in operating income of applicable entities. Earnings before
interest, taxes, depreciation and amortization (EBITDA) attributable to minority
interests was $21,718,000 for the nine months ended September 30, 1999 compared
to $20,398,000 for the same period in 1998. EBITDA is not intended to represent
net income or cash flows from operating activities in accordance with generally
accepted accounting principles and should not be considered a measure of the
Company's profitability or liquidity.
Minority interest in consolidated income for the three months ended September
30, 1999 decreased $164,000 compared to the same period in 1998. Earnings before
interest, taxes, depreciation and amortization (EBITDA) attributable to minority
interests was $6,660,000 for the three months ended September 30, 1999 compared
to $7,852,000 for the same period in 1998. EBITDA is not intended to represent
net income or cash flows from operating activities in accordance with generally
accepted accounting principles and should not be considered a measure of the
Company's profitability or liquidity.
Provision for income taxes
- --------------------------
Income tax expense for the nine months ended September 30, 1999 increased
$3,206,000 compared to the same period in 1998 and increased $305,000 for the
three months ended September 30, 1999 due primarily to the increase in pretax
earnings in 1999.
Liquidity and Capital Resources
- -------------------------------
Cash was $21,001,000 and $40,146,000 at September 30, 1999 and December 31,
1998, respectively. Cash provided by operations for the nine months ended
September 30, 1999 was $31,749,000 compared to cash provided by operations for
the nine months ended September 30, 1998 of $27,309,000. The increase in cash
from operation results from increased fee revenue collections attributed to
higher fee revenues during 1999, and lower income tax payments and the timing of
interest expense payments in 1999.
-20-
<PAGE>
Cash used in investing activities for the nine months ended September 30, 1999
was $23,454,000 compared to cash used in investing activities for the nine
months ended September 30, 1998 of $1,422,000. The change was primarily
attributed to an increase in purchases of equipment in 1999, a decrease in
distributions from equity investments from 1998 to 1999 and purchases of both
LASIK and lithotripsy operations in 1999 of $21,293,000. Cash used in financing
activities for the nine months ended September 30, 1999 was $27,440,000 which
included distributions to minority interest totaling $25,685,000, purchase of
treasury stock of $6,567,000 and payments on notes payable of $1,078,000, which
was partially offset by borrowings on notes payable of $3,673,000 and
contributions by minority interest of $2,138,000. Cash used in financing
activities for the nine months ended September 30, 1998 was $17,094,000,
primarily due to distributions to minority interests of $24,892,000 and purchase
of treasury stock of $11,905,000 partially offset by new borrowings of
$100,025,000 less payments on notes payable of $80,392,000.
The Company's existing senior credit facility is comprised of a revolving line
of credit. The revolving line of credit has a borrowing limit of $100 million,
none of which was drawn at September 30 and October 31, 1999.
On March 27, 1998, the Company completed an offering of $100 million of senior
subordinated notes due 2008 (the "Notes") to qualified institutional buyers. The
net proceeds from the offering of approximately $96 million were used to repay
all outstanding indebtedness under the Company's bank facility, with the
remainder to be used for general corporate purposes, including acquisitions. In
connection therewith, the Company recorded a charge to earnings of approximately
$4.4 million for debt issuance costs associated with the Notes. The Notes bear
interest at 8.75% and interest is payable semi-annually on April 1st and October
1st. Principal is due April 2008.
The Company intends to increase the number of its lithotripsy and RVC operations
primarily through acquisitions. The Company believes that the fragmented nature
of the lithotripsy industry, combined with operational challenges created by
increasing regulatory and business complexities, including Stark II, the Illegal
Remuneration Statute and similar state laws, will provide significant
lithotripsy acquisition opportunities. Where appropriate, the Company will seek
to increase its ownership interest in current lithotripsy operations by
purchasing interests of urologists and other investors who desire to divest due
to concerns over regulatory issues, to realize a return on their investment or
to retire. The Company intends to fund the purchase price for future
acquisitions using borrowings under its senior credit facility and cash flow
from operations. In addition, the Company may use shares of its common stock in
such acquisitions where appropriate.
During 1998, the Company announced a stock repurchase program of up to $25.0
million of common stock. From time to time, the Company may purchase additional
shares of its common stock where, in the judgment of management, market
valuations of its stock do not accurately reflect the Company's past and
projected results of operations. The Company intends to fund any such purchases
using available cash, cash flow from operations and borrowings under its senior
credit facility. The Company has purchased 2,791,300 shares of stock for a total
of $24,008,000 as of October 31, 1999.
The Company's ability to make scheduled payments of principal of, or to pay the
interest on, or to refinance, its indebtedness, or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control. Based upon the current level of
operations and anticipated cost savings and revenue growth, management believes
that cash flow from operations and available cash, together with available
borrowings under its senior credit facility, will be adequate to meet the
Company's future liquidity needs for at least the next several years. However,
there can be no assurance that the Company's business will generate sufficient
cash flow from operations, that anticipated revenue growth and operating
improvements will be realized or that future borrowings will be available under
the senior credit facility in an amount sufficient to enable the Company to
service its indebtedness or to fund its other liquidity needs.
-21-
<PAGE>
Impact of Inflation
- -------------------
The assets of the Company are not significantly affected by inflation because
the Company is not required to make large investments in fixed assets. However,
the rate of inflation will affect certain of the Company's expenses, such as
employee compensation and benefits.
Year 2000 Compliance
- --------------------
The "Year 2000 " issue refers to the phenomenon whereby computer programs,
having been written using two digits rather than four to define the applicable
year, may erroneously recognize a date using "00" as the year 1900 rather than
the year 2000. This error could potentially result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in similar
normal business activities.
The Company formed a Year 2000 Committee in mid 1998. The Committee was charged
with examining (1) internal hardware and software systems; (2) medical
equipment; (3) physical facilities; and (4) outside suppliers, as these items
relate to potential problems that could be caused by the inability to process
dates beyond December 31, 1999.
The Committee divided its task into four parts - assessment, remediation
planning, implementation and testing and contingency planning. Assessment,
remediation planning and implementation and testing have been substantially
completed for all four phases of the project. Contingency planning is discussed
below.
Internal hardware and software systems: The Company has completed substantially
all of the needed upgrades to its hardware and software systems.
Medical equipment: A review of the Company's lithotripters has determined that
their operation is not affected directly by the Year 2000 issue. The Company has
completed review of the miscellaneous ancillary medical equipment to determine
compliance. Several back up pieces of ancillary equipement may present incorrect
dates, but none are critical in the daily operations and failure would not
affect the ability to perform necessary procedures.
Physical facilities: The Committee has evaluated its non-computer equipment and
has determined that, except for its telephone system, there are no devices whose
failure would materially affect the ability to carry out the business of the
Company. A compliant telephone system is expected to be installed by November
30, 1999. The outside managers of the Company's office buildings have reported
that all aspects of the physical facilities - elevators, fire and security
systems, etc. are compliant. Their further inquiry of those supplying public
utilities have produced assurances of best efforts but no guarantee of
performance.
Outside suppliers: The Company has inquired about the state of Year 2000
readiness of those outside suppliers who were determined to be critical to the
Company's ability to carry out its business. The Company continues to survey
non-critical suppliers.
Contingency planning: The Company cannot be certain that it has identified and
will be successful in bringing into compliance all Year 2000 issues within its
control. It can be even less certain of critical services being supplied by
third parties beyond its control. The Company has formal contingency plans for
critical areas for carrying on its business in the event of unanticipated Year
2000-related failures. Presently, the Company believes that the most reasonably
likely worst case scenario would be a failure of relatively short duration of
basic third party services such as the power grid. With such a failure the
Company's planning will be directed toward a temporary suspension of operations
followed by plans for resumption and catch up operations. Due to the magnitude
of the uncertainties related to Year 2000 issues, the Company is unable to fully
assess the consequences of Year 2000 failures and, consequently, there could be
a material adverse effect on the Company's results of operations, financial
position and cash flows.
-22-
<PAGE>
To date, the Company has not experienced significant costs associated with the
Year 2000 issue and does not expect significant costs to be incurred in order to
correct the Year 2000 issue.
Forward-Looking Statements
- --------------------------
The statements contained in this Report on Form 10-Q that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectation, hopes,
intentions or strategies regarding the future. Readers should not place undue
reliance on forward-looking statements. All forward-looking statements included
in this document are based on information available to the Company on the date
hereof, and the Company assumes no obligation to update any such forward-looking
statements. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements. In addition to
any risks and uncertainties specifically identified in the text surrounding such
forward-looking statements, the reader should consult the Company's reports on
Form 10-K and other filings under the Securities Act of 1933 and the Securities
Exchange Act of 1934, for factors that could cause actual results to differ
materially from those presented.
The forward-looking statements included herein are necessarily based on various
assumptions and estimates and are inherently subject to various risks and
uncertainties, including risks and uncertainties relating to the possible
invalidity of the underlying assumptions and estimates and possible changes or
developments in social, economic, business, industry, market, legal and
regulatory circumstances and conditions and actions taken or omitted to be taken
by third parties, including customers, suppliers, business partners and
competitors and legislative, judicial and other governmental authorities and
officials. Assumptions related to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Any of such
assumptions could be inaccurate and therefore, there can be no assurance that
the forward-looking statements included in this Report on Form 10-Q will prove
to be accurate.
-23-
<PAGE>
PART II
OTHER INFORMATION
-24-
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
NONE.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
12. Computation of ratio of earnings to fixed charges
27. Financial Data Schedule
(b) Current Reports on Form 8-K
NONE
-25-
<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 12, 1999
By: /s/ Cheryl Williams
---------------------------
Cheryl Williams
Chief Financial Officer
-26-
EXHIBIT 12
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
EXHIBIT 12
<TABLE>
<S> <C> <C>
($ in thousands) Nine Months Ended September 30,
1999 1998
------- -------
Income before income taxes and
after minority interest $ 19,670 $10,951
Undistributed equity income (236) (41)
Minority interest income of subsidiaries
with fixed charges 2,782 2,831
------- -------
Adjusted earnings 22,216 13,741
------- -------
Interest on debt 7,010 6,426
Debt issuance costs -- 4,982
------- -------
Total fixed charges 7,010 11,408
------- -------
Total available earnings before fixed charges $29,226 $25,149
======= =======
Ratio 4.2 2.2
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the September 30, 1999 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-31-1999 DEC-31-1999
<PERIOD-START> JUL-01-1999 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<CASH> 21,001 21,001
<SECURITIES> 0 0
<RECEIVABLES> 26,500 26,500
<ALLOWANCES> 109 109
<INVENTORY> 0 0
<CURRENT-ASSETS> 54,866 54,866
<PP&E> 43,292 43,292
<DEPRECIATION> 23,250 23,250
<TOTAL-ASSETS> 246,063 246,063
<CURRENT-LIABILITIES> 16,710 16,710
<BONDS> 0 0
0 0
0 0
<COMMON> 194 194
<OTHER-SE> 94,976 94,976
<TOTAL-LIABILITY-AND-EQUITY> 246,063 246,063
<SALES> 0 0
<TOTAL-REVENUES> 30,632 84,622
<CGS> 0 0
<TOTAL-COSTS> 11,917 32,728
<OTHER-EXPENSES> 2,784 7,812
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,356 7,010
<INCOME-PRETAX> 7,230 19,670
<INCOME-TAX> 2,891 7,867
<INCOME-CONTINUING> 4,339 11,803
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,339 11,803
<EPS-BASIC> 0.26 0.69
<EPS-DILUTED> 0.26 0.69
</TABLE>
