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, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities and 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, TX 78746
(Address of principal executive office) (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, 2000
------------------- -------------
Common Stock, $.01 par value 15,773,533
<PAGE>
PART I
FINANCIAL INFORMATION
2
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands, except per share data) 2000 1999 2000 1999
---- ---- ---- ----
Revenue:
Lithotripsy:
Fee revenues $20,678 $21,647 $58,961 $62,720
Management fees 931 1,403 2,759 4,165
Equity income 690 756 1,926 1,919
-------- -------- -------- --------
22,299 23,806 63,646 68,804
Manufacturing 5,757 5,375 16,861 13,248
Refractive 6,941 987 16,021 987
Prostatherapy 410 406 1,203 1,409
Other 38 58 124 174
-------- -------- -------- --------
Total revenue 35,445 30,632 97,855 84,622
-------- -------- -------- --------
Cost of services and general and
administrative expenses:
Lithotripsy 5,713 5,385 16,843 17,225
Manufacturing 4,478 4,242 13,051 10,038
Refractive 4,432 529 9,259 529
Prostatherapy 262 332 935 1,160
Other 40 54 135 173
Corporate 1,232 1,375 3,365 3,603
Relocation of central billing office 220 - 570 -
-------- -------- -------- --------
16,377 11,917 44,158 32,728
Depreciation and amortization 3,839 2,784 10,192 7,812
-------- -------- -------- --------
20,216 14,701 54,350 40,540
-------- -------- -------- --------
Operating income 15,229 15,931 43,505 44,082
Other income (deductions):
Interest and dividends 199 466 754 1,204
Interest expense (2,678) (2,356) (7,682) (7,010)
Loan fees (4) - (111) -
Release of contractual obligation - - - 1,140
Other, net 16 61 89 (230)
-------- -------- -------- --------
(2,467) (1,829) (6,950) (4,896)
-------- -------- -------- --------
Income before provision for income
taxes and minority interests 12,762 14,102 36,555 39,186
Minority interest in consolidated income 7,828 6,872 20,983 19,516
Provision for income taxes 1,766 2,891 6,004 7,867
-------- -------- -------- --------
Net income $ 3,168 $ 4,339 $ 9,568 $ 11,803
======== ======== ======== ========
Basic earnings per share:
Net income $ 0.20 $ 0.26 $ 0.59 $ 0.69
======== ======== ======== ========
Weighted average shares outstanding 15,943 16,818 16,198 17,096
======== ======== ======== ========
Diluted earnings per share:
Net income $ 0.20 $ 0.26 $ 0.59 $ 0.69
======== ======== ======== ========
Weighted average shares outstanding 16,025 17,000 16,311 17,225
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
($ in thousands) 2000 1999
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 9,576 $ 20,064
Investments 1,133 4,120
Accounts receivable, less allowance for doubtful
accounts of $242 in 2000 and $224 in 1999 26,068 23,273
Other receivables 5,506 3,491
Deferred income taxes 663 1,066
Prepaid expenses and other current assets 1,561 2,322
Inventory 5,519 3,676
-------- --------
Total current assets 50,026 58,012
-------- --------
Property and equipment:
Equipment, furniture and fixtures 52,904 42,128
Building and leasehold improvements 3,470 2,092
-------- --------
56,374 44,220
Less accumulated depreciation and amortization (31,140) (25,567)
-------- --------
Property and equipment, net 25,234 18,653
-------- --------
Other investments 9,334 18,963
Goodwill, at cost, net of amortization 177,839 149,088
Other noncurrent assets 2,961 2,110
-------- --------
$265,394 $246,826
======== ========
See accompanying notes to consolidated financial statements.
4
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
September 30, December 31,
($ in thousands, except share data) 2000 1999
-------- --------
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 1,728 $ 1,763
Accounts payable 6,824 3,290
Accrued distributions to minority interests - 8,332
Accrued expenses 7,282 7,108
-------- --------
Total current liabilities 15,834 20,493
Long-term debt, net of current portion 115,281 103,797
Deferred income taxes 9,315 6,400
-------- --------
Total liabilities 140,430 130,690
Minority interest 24,355 19,454
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value;
1,000,000 shares authorized;
none outstanding - -
Common stock, $0.01 par value;
40,000,000 shares authorized;
19,524,533 shares issued in 2000
and 19,367,267 shares issued in 1999 194 194
Capital in excess of par value 88,977 87,655
Accumulated earnings 43,222 33,654
Treasury stock, at cost; 3,716,700 shares
in 2000 and 2,875,300 shares in 1999 (31,784) (24,821)
-------- --------
Total stockholders' equity 100,609 96,682
-------- --------
$265,394 $246,826
======== ========
See accompanying notes to consolidated financial statements.
5
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
($ in thousands) 2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $ 92,473 $ 79,882
Cash paid to employees, suppliers of
goods and others (47,123) (39,725)
Purchases of investments (1,992) -
Proceeds from sales and maturities of
investments 5,091 -
Interest received 641 1,204
Interest paid (9,753) (4,801)
Taxes paid (3,760) (4,811)
-------- --------
Net cash provided by operating
activities 35,577 31,749
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of operating entities (18,344) (21,293)
Purchases of equipment and leasehold
improvements (8,352) (4,787)
Distributions from investments 2,909 2,062
Other 168 564
-------- --------
Net cash used in investing activities (23,619) (23,454)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 11,103 3,673
Payments on notes payable, exclusive
of interest (1,300) (1,078)
Distributions to minority interest (25,780) (25,685)
Contributions by minority interest,
net of buyouts 329 2,138
Purchases of treasury stock (6,963) (6,567)
Exercise of stock options, and sales
and purchases of put options 165 79
-------- --------
Net cash used in financing activities (22,446) (27,440)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,488) (19,145)
Cash and cash equivalents, beginning of period 20,064 40,146
-------- --------
Cash and cash equivalents, end of period $ 9,576 $ 21,001
======== ========
See accompanying notes to consolidated financial statements.
6
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
Nine Months Ended September 30,
($ in thousands) 2000 1999
-------- --------
Reconciliation of net income to cash
provided by operating activities:
Net income $ 9,568 $ 11,803
Adjustments to reconcile net income
to cash provided by operating activities:
Minority interest in consolidated income 20,983 19,516
Depreciation and amortization 10,192 7,812
Provision for deferred income taxes 2,881 2,950
Equity in earnings of affiliates (1,805) (2,032)
Other (176) (1,001)
Changes in operating assets and liabilities,
net of effect of purchase transactions:
Investments 2,987 -
Accounts receivable (2,586) (2,529)
Other receivables (2,427) (514)
Other assets (1,755) (630)
Accounts payable 2,105 (3,358)
Accrued expenses (4,390) (268)
-------- --------
Total adjustments 26,009 19,946
-------- --------
Net cash provided by operating activities $ 35,577 $ 31,749
======== ========
See accompanying notes to consolidated financial statements.
7
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
1. General
-- -------
The accompanying unaudited consolidated financial statements have been prepared
in conformity with the accounting principles for interim financial statements
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These
statements reflect all adjustments which are, in the opinion of management,
necessary for a fair statement of the financial position as of September 30,
2000 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, 1999 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.
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133") in June 1998. SFAS No. 133 establishes reporting
standards for derivative instruments and hedging activities that require an
entity to recognize all derivatives as assets or liabilities measured at fair
value and is effective for financial statements issued for all fiscal quarters
of fiscal years beginning after June 15, 2000. If certain conditions are met, a
derivative may be specifically designated as a hedge of the exposure to changes
in the fair market value, variable cash flow, or foreign currency of a
recognized asset or liability or certain other transactions and firm
commitments. The effects of the adoption of SFAS No. 133 will not be material to
the Company's financial position or results of operations.
2. Earnings per share
-- ------------------
Basic 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:
Basic Diluted
earnings earnings
($ in thousands, except per share data) per share per share
--------- ---------
Nine Months Ended September 30, 2000
------------------------------------
Net income $9,568 $9,568
====== ======
Weighted average shares outstanding 16,198 16,198
Effect of dilutive securities - 113
------ ------
Shares for EPS calculation 16,198 16,311
====== ======
Net income per share $0.59 $0.59
===== =====
8
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (continued)
(Unaudited)
2. Earnings per share (continued)
-- ------------------------------
Basic Diluted
earnings earnings
($ in thousands, except per share data) per share per share
--------- ---------
Nine Months Ended September 30, 1999
------------------------------------
Net income $11,803 $11,803
======= =======
Weighted average shares outstanding 17,096 17,096
Effect of dilutive securities - 129
------- -------
Shares for EPS calculation 17,096 17,225
======= =======
Net income per share $0.69 $0.69
======= =======
Three Months Ended September 30, 2000
-------------------------------------
Net income $3,168 $3,168
====== ======
Weighted average shares outstanding 15,943 15,943
Effect of dilutive securities - 82
------- -------
Shares for EPS calculation 15,943 16,025
======= =======
Net income per share $0.20 $0.20
======= =======
Three Months Ended September 30, 1999
-------------------------------------
Net income $4,339 $4,339
======= =======
Weighted average shares outstanding 16,818 16,818
Effect of dilutive securities - 182
------- -------
Shares for EPS calculation 16,818 17,000
======= =======
Net income per share $0.26 $0.26
======= =======
Unexercised stock options and warrants to purchase 1,437,000 and 1,107,500
shares of the Company's common stock as of September 30, 2000 and 1999 were not
included in the computation of diluted EPS because the effect would be
antidilutive.
9
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (continued)
(Unaudited)
3. Segment Reporting
-- -----------------
The Company has three reportable segments: lithotripsy, manufacturing and
refractive. The lithotripsy segment provides services related to the operation
of the lithotripters, including scheduling, staffing, training, quality
assurance, maintenance, regulatory compliance and contracting with payors,
hospitals and surgery centers. The manufacturing segment provides manufacturing
services and installation, upgrade, refurbishment and repair of major medical
equipment for mobile medical service providers. The refractive segment provides
services related to the operations of refractive vision correction centers.
Other operating segments, which do not meet the quantitative thresholds for
reportable segments, include prostatherapy services.
The Company measures performance based on the pretax income or loss from its
operating segments, which do not include unallocated corporate general and
administrative expenses and corporate interest revenue and expense.
<TABLE>
<S> <C> <C> <C> <C>
($ in thousands) Lithotripsy Manufacturing Refractive Other
----------- ------------- ---------- -----
Nine Months Ended September 30, 2000
------------------------------------
Revenue from
external customers $63,646 $16,861 $16,021 $1,327
Intersegment revenues - 293 - -
Segment profit 21,180 2,692 1,653 86
Nine Months Ended September 30, 1999
------------------------------------
Revenue from
external customers $68,804 $13,248 987 $1,583
Intersegment revenues - 286 - -
Segment profit (loss) 26,005 2,357 244 59
</TABLE>
10
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (continued)
(Unaudited)
3. Segment Reporting (continued)
-- -----------------------------
The following is a reconciliation of the measure of segment profit per above to
consolidated income before income taxes per the consolidated statements of
operations:
Nine Months ended September 30,
($ in thousands) 2000 1999
---- ----
Total segment profit $25,611 $28,665
Unallocated corporate expenses:
General and administrative (3,365) (3,882)
Net interest expense (5,896) (5,772)
Loan fees (111) -
Relocation charges (570) -
Release of contractual obligation - 1,140
Other, net (97) (481)
-------- --------
Total unallocated corporate expenses (10,039) (8,995)
-------- --------
Income before income taxes $15,572 $19,670
======== ========
<TABLE>
<S> <C> <C> <C> <C>
($ in thousands) Lithotripsy Manufacturing Refractive Other
----------- ------------- ---------- -----
Three Months Ended September 30, 2000
-------------------------------------
Revenue from
external customers $22,299 $5,757 $6,941 $448
Intersegment revenues - 67 - -
Segment profit 7,265 966 540 53
Three Months Ended September 30, 1999
-------------------------------------
Revenue from
external customers $23,806 $5,375 987 $464
Intersegment revenues - 138 - -
Segment profit (loss) 9,359 990 244 73
</TABLE>
11
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (continued)
(Unaudited)
3. Segment Reporting (continued)
-- -----------------------------
The following is a reconciliation of the measure of segment profit per above to
consolidated income before income taxes per the consolidated statements of
operations:
Three Months ended September 30,
($ in thousands) 2000 1999
---- ----
Total segment profit $8,824 $10,666
Unallocated corporate expenses:
General and administrative (1,232) (1,593)
Net interest expense (2,394) (1,846)
Loan fees (4) -
Relocation charges (220) -
Release of contractual obligation - -
Other, net (40) 3
-------- --------
Total unallocated corporate expenses (3,890) (3,436)
-------- --------
Income before income taxes $4,934 $7,230
======== ========
4. Acquisitions
-- ------------
Effective March 1, 2000, the Company purchased a 60% interest in the Mann
Berkeley Caplan Laser Center of Austin, Texas, a refractive vision correction
center. The Company paid approximately $3,765,000 in cash and issued warrants to
purchase 27,000 shares of common stock, and has accounted for this transaction
using the purchase method of accounting. Additionally in conjunction with this
transaction, the Company issued warrants to purchase 28,000 shares of common
stock to a third party. Total goodwill recognized of $3,773,000 is being
amortized over twenty-five years.
Effective March 1, 2000, the Company purchased a 60% interest in the Caster Eye
Center, a refractive vision correction center. The Company paid approximately
$5,828,000 in cash, and has accounted for this transaction using the purchase
method of accounting. Additionally in conjunction with this transaction, the
Company issued warrants to purchase 44,000 shares of common stock to a third
party. Total goodwill recognized of $5,894,000 is being amortized over twenty
years.
Effective April 1, 2000, the Company purchased a 65% interest in New York Eye
Specialists, a refractive vision correction center. The Company paid
approximately $8,872,000 in cash, and has accounted for this transaction using
the purchase method of accounting. Additionally in conjunction with this
transaction, the Company issued warrants to purchase 67,000 shares of common
stock to a third party. Total goodwill recognized of $8,705,000 is being
amortized over twenty years.
12
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (continued)
(Unaudited)
Effective July 1, 2000, the Company amended certain agreements related to its
60% interest in Barnet Dulaney Eye Center. As a result of these amendments, the
Company's investment in the Barnet Dulaney Eye Center has been consolidated in
the accompanying financial statements as of July 1, 2000. Prior to June 30, 2000
this investment was accounted for on the equity method. Total goodwill of
$9,000,000 is being amortized over twenty-five years.
Effective September 1, 2000, the Company purchased a 65% interest in Vision
Correction Centers of Kansas City, a refractive vision correction center. The
Company paid approximately $4,530,000 in cash for the center in October 2000,
and has accounted for this transaction using the purchase method of accounting.
Additionally in conjunction with this transaction, the Company issued warrants
to purchase 33,750 shares of common stock to a third party. Total goodwill
recognized of $4,489,000 is being amortized over twenty years.
The proforma effects of these acquisitions on an aggregated basis are not
material.
5. Condensed Financial Information Regarding Guarantor Subsidiaries
-- ----------------------------------------------------------------
Condensed consolidating financial information regarding the Company, Guarantor
Subsidiaries and Non-guarantor Subsidiaries for September 30, 2000 and 1999 is
presented below for purposes of complying with the reporting requirements of the
Guarantor Subsidiaries. Separate financial statements and other disclosures
concerning each Guarantor Subsidiary have not been presented because management
has determined that such information is not material to investors. The Guarantor
Subsidiaries are wholly owned subsidiaries of the Company who have fully and
unconditionally guaranteed the 8.75% unsecured senior subordinated Notes.
13
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income
Nine Months Ended September 30, 2000
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- -------------- -------------- -------------- --------------
Revenue:
Lithotripsy:
Fee revenues $ - $ 12,234 $ 46,727 $ - $ 58,961
Management fees - 1,571 1,188 - 2,759
Equity income 20,863 14,231 387 (33,555) 1,926
--------------- -------------- -------------- -------------- --------------
20,863 28,036 48,302 (33,555) 63,646
Manufacturing - - 16,861 - 16,861
Refractive 1,448 3,546 15,203 (4,176) 16,021
Prostatherapy - - 1,203 - 1,203
Other - 124 - - 124
--------------- -------------- -------------- -------------- --------------
Total revenue 22,311 31,706 81,569 (37,731) 97,855
--------------- -------------- -------------- -------------- --------------
Cost of services and general and
administrative expenses:
Lithotripsy - 419 16,424 - 16,843
Manufacturing - - 13,051 - 13,051
Refractive - 83 9,176 - 9,259
Prostatherapy - (216) 1,151 - 935
Other - 135 - - 135
Corporate 55 3,310 - - 3,365
Relocation of central billing office - 570 - - 570
--------------- -------------- -------------- -------------- --------------
55 4,301 39,802 - 44,158
Depreciation and amortization - 5,251 4,941 - 10,192
--------------- -------------- -------------- -------------- --------------
55 9,552 44,743 - 54,350
--------------- -------------- -------------- -------------- --------------
Operating income 22,256 22,154 36,826 (37,731) 43,505
--------------- -------------- -------------- -------------- --------------
Other income (deductions):
Interest and dividends 189 230 335 - 754
Interest expense (7,121) (6) (555) - (7,682)
Loan fees (111) - - - (111)
Other, net 84 (60) 65 - 89
--------------- -------------- -------------- -------------- --------------
Total other income (deductions) (6,959) 164 (155) - (6,950)
--------------- -------------- -------------- -------------- --------------
Income before provision for income
taxes and minority interest 15,297 22,318 36,671 (37,731) 36,555
Minority interest in consolidated income - - - 20,983 20,983
Provision for income taxes 5,729 7 268 - 6,004
--------------- -------------- -------------- -------------- --------------
Net income $ 9,568 $ 22,311 $ 36,403 $ (58,714) $ 9,568
=============== ============== ============== ============== ==============
</TABLE>
14
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income
Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- -------------- -------------- -------------- --------------
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
Other - 174 - - 174
--------------- -------------- -------------- -------------- --------------
Total revenue 26,441 33,438 63,803 (39,060) 84,622
--------------- -------------- -------------- -------------- --------------
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
--------------- ------------- -------------- -------------- --------------
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 and dividends 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) $11,803
=============== ============== ============== ============== ==============
</TABLE>
15
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income
Three Months Ended September 30, 2000
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- -------------- -------------- -------------- --------------
Revenue:
Lithotripsy:
Fee revenues $ - $ 4,060 $ 16,618 - 20,678
Management fees - 552 379 - 931
Equity income 7,085 5,384 154 (11,933) 690
--------------- -------------- -------------- -------------- --------------
7,085 9,996 17,151 (11,933) 22,299
Manufacturing - - 5,757 - 5,757
Refractive 481 2,028 6,901 (2,469) 6,941
Prostatherapy - - 410 - 410
Other - 38 - - 38
--------------- -------------- -------------- -------------- --------------
Total revenue 7,566 12,062 30,219 (14,402) 35,445
--------------- -------------- -------------- -------------- --------------
Cost of services and general and
administrative expenses:
Lithotripsy - 237 5,476 - 5,713
Manufacturing - - 4,478 - 4,478
Refractive - 66 4,366 - 4,432
Prostatherapy - (72) 334 - 262
Other - 40 - - 40
Corporate 31 1,201 - - 1,232
Relocation of central billing office - 220 - - 220
--------------- -------------- -------------- -------------- --------------
31 1,692 14,654 - 16,377
Depreciation and amortization - 2,053 1,786 - 3,839
--------------- -------------- -------------- -------------- --------------
31 3,745 16,440 - 20,216
--------------- -------------- -------------- -------------- --------------
Operating income 7,535 8,317 13,779 (14,402) 15,229
--------------- -------------- -------------- -------------- --------------
Other income (deductions):
Interest and dividends 12 68 119 - 199
Interest expense (2,470) (819) 611 - (2,678)
Loan fees (4) - - - (4)
Other, net 31 (2) (13) - 16
--------------- -------------- -------------- -------------- --------------
Total other income (deductions) (2,431) (753) 717 - (2,467)
--------------- -------------- -------------- -------------- --------------
Income before provision for income
taxes and minority interest 5,104 7,564 14,496 (14,402) 12,762
Minority interest in consolidated income - - - 7,828 7,828
Provision for income taxes 1,936 (2) (168) - 1,766
--------------- -------------- -------------- -------------- --------------
Net income $ 3,168 $ 7,566 $ 14,664 $ (22,230) $ 3,168
=============== ============== ============== ============== ==============
</TABLE>
16
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income
Three Months Ended September 30, 1999
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- -------------- -------------- -------------- --------------
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
Other - 58 - - 58
--------------- -------------- -------------- -------------- --------------
Total revenue 9,154 11,978 22,716 (13,216) 30,632
--------------- -------------- -------------- -------------- --------------
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
--------------- ------------- -------------- -------------- --------------
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 and dividends 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>
17
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet
September 30, 2000
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- -------------- -------------- -------------- --------------
ASSETS
Current assets:
Cash $ 112 $ 4,558 $ 4,906 $ - $ 9,576
Investments 1,133 - - - 1,133
Accounts receivable, net - 3,043 23,025 - 26,068
Other receivables 291 2,498 2,717 - 5,506
Deferred income taxes 60 603 - - 663
Prepaid expenses and other current 48 395 1,118 - 1,561
Inventory - - 5,519 - 5,519
--------------- -------------- -------------- -------------- --------------
Total current assets 1,644 11,097 37,285 - 50,026
--------------- -------------- -------------- -------------- --------------
Property and equipment:
Equipment, furniture and fixtures - 5,482 47,422 - 52,904
Building and leasehold improvements - 533 2,937 - 3,470
--------------- -------------- -------------- -------------- --------------
- 6,015 50,359 - 56,374
Less accumulated depreciation
and amortization - (4,065) (27,075) - (31,140)
--------------- -------------- -------------- -------------- --------------
Property and equipment, net - 1,950 23,284 - 25,234
--------------- -------------- -------------- -------------- --------------
Investment in subsidiaries
and other investments 212,744 32,910 - (236,320) 9,334
Goodwill, at cost, net of amortization - 177,839 - - 177,839
Other noncurrent assets 363 1,409 1,189 - 2,961
--------------- -------------- -------------- -------------- --------------
$ 214,751 $ 225,205 $ 61,758 $ (236,320) $ 265,394
=============== ============== ============== ============== ==============
LIABILITIES
Current liabilities:
Current portion of long-term debt $ - $ - $ 1,728 $ - $ 1,728
Accounts payable - 2,147 4,677 - 6,824
Accrued expenses 2,759 3,220 1,303 - 7,282
--------------- -------------- -------------- -------------- --------------
Total current liabilities 2,759 5,367 7,708 - 15,834
Long-term debt, net of current portion 109,000 162 6,119 - 115,281
Deferred income taxes 2,383 6,932 - - 9,315
--------------- -------------- -------------- -------------- --------------
Total liabilities 114,142 12,461 13,827 - 140,430
--------------- -------------- -------------- -------------- --------------
Minority interest - - - 24,355 24,355
STOCKHOLDERS' EQUITY
Common stock 194 - - - 194
Capital in excess of par value 88,977 - - - 88,977
Accumulated earnings 43,222 - - - 43,222
Treasury stock (31,784) - - - (31,784)
Subsidiary net equity - 212,744 47,931 (260,675) -
--------------- -------------- -------------- -------------- --------------
Total stockholders' equity 100,609 212,744 47,931 (260,675) 100,609
--------------- -------------- -------------- -------------- --------------
$ 214,751 $ 225,205 $ 61,758 $ (236,320) $ 265,394
=============== ============== ============== ============== ==============
</TABLE>
18
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2000
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ (10,047) $ 10,727 $ 34,897 $ - $ 35,577
--------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of operating entities - (18,344) - - (18,344)
Purchases of equipment and leasehold
improvements - (940) (7,412) - (8,352)
Distributions from subsidiaries 14,914 13,270 - (28,184) -
Investments in subsidiaries (9,000) - - 9,000 -
Distributions from investments - 2,909 - - 2,909
Other - 168 - - 168
--------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
investing activities 5,914 (2,937) (7,412) (19,184) (23,619)
--------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 9,000 - 2,103 - 11,103
Payments on notes payable exclusive of
interest - - (1,300) - (1,300)
Contributions by minority interest,
net of buyouts - - 329 - 329
Distributions to minority interest - - - (25,780) (25,780)
Purchases of treasury stock (6,963) - - - (6,963)
Exercise of stock options, and sales and
purchases of put options 165 - - - 165
Contributions by parent - 9,000 - (9,000) -
Distributions to equity owners - (14,914) (39,050) 53,964 -
--------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
financing activities 2,202 (5,914) (37,918) 19,184 (22,446)
--------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,931) 1,876 (10,433) - (10,488)
Cash and cash equivalents, beginning
of period 2,043 2,682 15,339 - 20,064
--------------- -------------- -------------- -------------- --------------
Cash and cash equivalents, end of period $ 112 $ 4,558 $ 4,906 $ - $ 9,576
=============== ============== ============== ============== ==============
</TABLE>
19
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ (20,170) $ 10,447 $ 41,472 $ - $ 31,749
--------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of operating entities - (11,217) (10,076) - (21,293)
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
Other - 192 372 - 564
--------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
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)
Contributions by minority interest,
net of buyouts - - 2,138 - 2,138
Distributions to minority interest - - - (25,685) (25,685)
Purchases of treasury stock (6,567) - - - (6,567)
Other 79 - - - 79
Distributions to equity owners - (16,856) (41,180) 58,036 -
--------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
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, beginning
of period 15,798 7,585 16,763 - 40,146
--------------- -------------- -------------- -------------- --------------
Cash and cash equivalents, end of period $ 5,996 $ 7,009 $ 7,996 $ - $ 21,001
=============== ============== ============== ============== ==============
</TABLE>
20
<PAGE>
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
Revenues
For the nine months ended September 30, 2000, total revenues increased
$13,233,000 (16%) as compared to the same period in 1999. Revenues from
lithotripter operations decreased by $5,158,000 (7%) primarily due to lower
procedure volume and fluctuations in payormix. Revenues from manufacturing
increased $3,613,000 (27%) due to increased sales of MRI trailers as well as
expansion into other modalities. Revenues from refractive services were
$16,021,000, due to procedures from four centers acquired in 2000. Revenues from
prostatherapy operations declined $206,000 (15%) due to lower procedure volume.
Total revenues for the three months ended September 30, 2000 increased
$4,813,000 (16%) as compared to the same period in 1999. Revenues from
lithotripter operations decreased by $1,507,000 (6%) and revenues from
manufacturing increased $382,000 (7%). Revenues from refractive services were
$6,941,000, due to the acquisitions discussed above. Revenues from prostatherapy
operations declined $4,000 (1%) due to lower procedure volume.
Expenses
For the nine months ended September 30, 2000, costs and expenses (excluding
depreciation and amortization) increased from 39% to 45% of revenues, primarily
due to increases in the manufacturing and refractive operations, both of
which have lower operating margins than the lithotripsy operations. Costs of
services associated with lithotripsy operations decreased $382,000 (2%) in
absolute terms and slightly increased from 25% to 26% of lithotripsy revenues
due to the levels of fixed costs relative to a lower revenue base. Cost of
services and general and administrative expenses associated with manufacturing
increased $3,013,000 (30%) due to increased sales. Cost of services associated
with refractive operations were $9,259,000. Cost of services associated with
prostatherapy operations decreased $225,000 (19%) due to lower procedure volume.
Corporate expenses decreased from 4% to 3% of revenues,decreasing $238,000
(7%) in absolute terms due to lower variable expenses during 2000. During
the second and third quarter the Company recorded nonrecurring charges totaling
$570,000 for the relocation of its central business office (CBO) from North
Carolina to Texas. The relocation of the CBO is being done in conjunction with
the purchase and implementation of a new practice management system.
Costs and expenses (excluding depreciation and amortization) for the three
months ended September 30, 2000 increased from 39% to 46% of revenues, primarily
due to increases in the manufacturing and refractive operations, both of which
have lower operating margins than the lithotripsy operations. Costs of services
associated with lithotripsy operations increased $328,000 (6%) and increased
from 23% to 26% of lithotripsy revenues. Cost of services and general and
administrative expenses associated with manufacturing increased $236,000 (6%)
consistent with the increase in sales. Cost of services associated with
refractive operations were $4,432,000. Cost of services associated with
prostatherapy operations decreased $70,000 (21%) due to lower variable costs.
Corporate expenses decreased from 4% to 3% of revenues, decreasing $143,000
(10%) in absolute terms due to lower variable expenses in 2000.
21
<PAGE>
Other Income (Deductions)
For the nine months ended September 30, 2000, other deductions increased
$2,054,000 (42%) compared to the same period in 1999, primarily due to a one
time recognition of income related to a 1999 release of a contractual obligation
related to a management incentive compensation program. Also contributing to
the increase in expense was $111,000 related to a restructuring of the Company's
$100 million revolving credit facility, and a $672,000 increase in interest
expense due to higher outstanding debt balances, partially offset by a decrease
in other expense as the 1999 balance included a write-off of costs related to a
proposed acquisition.
Other deductions for the three months ended September 30, 2000 increased
$638,000 (35%) compared to the same period in 1999 primarily due to an increase
in interest expense and a decrease in interest income.
Minority Interest In Consolidated Income
Minority interest in consolidated income for the nine months ended September
30, 2000 increased $1,467,000 compared to the same period in 1999, primarily
as a result of the refractive acquisitions and the reengineering of certain
lithotripsy partnerships. Earnings before interest, taxes, depreciation and
amortization (EBITDA) attributable to minority interest was $24,041,000 for the
nine months ended September 30, 2000 compared to $21,718,000 for the same period
in 1999.
Minority interest in consolidated income for the three months ended September
30, 2000 increased $956,000 compared to the same period in 1999, primarily as
a result of the refractive acquisitions and the reengineering of certain
lithotripsy partnerships. Earnings before interest, taxes, depreciation and
amortization (EBITDA) attributable to minority interest was $8,714,000 for the
three months ended September 30, 2000 compared to $8,238,000 for the same period
in 1999.
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
Provision for income taxes for the nine months ended September 30, 2000
decreased $1,863,000 and for the three months ended September 30, 2000
decreased $1,125,000 compared to the same periods in 1999 due to a decrease in
taxable income. The effective tax rate includes the impact of the Federal
tax rate as well as numerous state tax rates for the Company, and the impact of
the Federal and state rates for a partially owned consolidated corporation,
which is required to file separate tax returns.
Liquidity and Capital Resources
Cash was $9,576,000 and $20,064,000 at September 30, 2000 and December 31, 1999,
respectively. Cash provided by operations for the nine months ended September
30, 2000 was $35,577,000 compared to cash provided by operations for the nine
months ended September 30, 1999 of $31,749,000. The increase was attributable to
increased operations as well as proceeds received from sales and maturities of
investments of $5,091,000.
22
<PAGE>
Cash used in investing activities for the nine months ended September 30, 2000
was $23,619,000 compared to cash used in investing activities for the nine
months ended September 30, 1999 of $23,454,000. The increase was attributable to
an increase in the purchase of equipment. Cash used in financing activities for
the nine months ended September 30, 2000 was $22,446,000 compared to cash used
for financing activities for the nine months ended September 30, 1999 of
$27,440,000. The decrease in cash used was due to additional borrowings,
primarily $9,000,000 on the Company's senior credit facility. Additionally,
contributions provided by minority interest decreased and cash used to purchase
treasury stock increased.
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
$9 and $14.5 million of which was drawn at September 30, 2000 and October 31,
2000.
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 was used to repay
all outstanding indebtedness under the Company's bank facility, with the
remainder used for general corporate purposes, including acquisitions. 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 operations
primarily through acquisitions and the number of its refractive operations
through both acquisitions and development. The Company intends to fund future
acquisitions and developments 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. In February 2000 the Company announced an increase in
the authorized repurchase amount from $25.0 million to $35.0 million. 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 3,751,000 shares of stock for a total of $32,032,000 as of October
31, 2000.
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.
23
<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.
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.
24
<PAGE>
PART II
OTHER INFORMATION
25
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
12. Computation of ratio of earnings to fixed charges.
(b) Current Reports on Form 8-K
NONE
26
<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 13, 2000 By: /s/ Cheryl L. Williams
----------------------
Cheryl L. Williams, Senior Vice President
and Chief Financial Officer
27
<PAGE>
