UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 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 April 30, 2000
Common Stock, $.01 par value 16,210,034
<PAGE>
PART I
2
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
($ in thousands, except per share data) 2000 1999
------ ------
Revenue:
Lithotripsy:
Fee revenues $19,070 $19,496
Management fees 894 1,351
Equity income 570 562
------ ------
20,534 21,409
Manufacturing 5,527 3,400
Refractive 2,935 --
Prostatherapy 402 518
Other 45 55
------ ------
Total revenue 29,443 25,382
Cost of services and general
and administrative expenses:
Lithotripsy 5,395 6,042
Manufacturing 4,290 2,454
Refractive 1,501 --
Prostatherapy 359 457
Other 50 61
Corporate 956 871
------ ------
12,551 9,885
Depreciation and amortization 2,920 2,475
------ ------
15,471 12,360
------ ------
Operating income 13,972 13,022
Other income (deductions):
Interest and dividends 358 405
Interest expense (2,426) (2,329)
Loan fees (84) --
Other, net (5) (338)
------ ------
(2,157) (2,262)
Income before provision for income
taxes and minority interests 11,815 10,760
Minority interest in consolidated income 6,455 5,443
Provision for income taxes 2,063 2,155
------ ------
Net income $3,297 $3,162
====== ======
Basic earnings per share:
Net income $ 0.20 $ 0.18
====== ======
Weighted average shares outstanding 16,435 17,387
====== ======
Diluted earnings per share:
Net income $ 0.20 $ 0.18
====== ======
Weighted average shares outstanding 16,607 17,495
====== ======
See accompanying notes to consolidated financial statements.
3
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
($ in thousands) 2000 1999
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $25,435 $20,064
Investments 639 4,120
Accounts receivable, less allowance
for doubtful accounts of $246 in
2000 and $224 in 1999 21,918 23,273
Other receivables 2,560 3,491
Deferred income taxes 987 1,066
Prepaid expenses and other current assets 1,847 2,322
Inventory 4,906 3,676
--------- ---------
Total current assets 58,292 58,012
--------- ---------
Property and equipment:
Equipment, furniture and fixtures 43,766 42,128
Building and leasehold improvements 2,227 2,092
--------- ---------
45,993 44,220
Less accumulated depreciation
and amortization (26,881) (25,567)
--------- ---------
Property and equipment, net 19,112 18,653
--------- ---------
Other investments 18,945 18,963
Goodwill, at cost, net of amortization 151,370 149,088
Other noncurrent assets 2,395 2,110
--------- ---------
$250,114 $246,826
========= ==========
See accompanying notes to consolidated financial statements.
4
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
March 31, December 31,
($ in thousands, except share data) 2000 1999
--------- ---------
LIABILITIES
Current liabilities:
Current portion of long-term debt $1,822 $1,763
Accounts payable 3,564 3,290
Accrued distributions to minority
interests 5,280 8,332
Accrued expenses 8,276 7,108
--------- ---------
Total current liabilities 18,942 20,493
Long-term debt, net of current portion 104,475 103,797
Deferred income taxes 7,302 6,400
--------- ---------
Total liabilities 130,719 130,690
Minority interest 20,569 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;
19,372,267 shares issued in 2000 and
19,367,267 shares issued in 1999 194 194
Capital in excess of par value 88,019 87,655
Accumulated earnings 36,951 33,654
Treasury stock, at cost; 3,053,400 shares
in 2000 and 2,875,300 shares in 1999 (26,338) (24,821)
--------- ---------
Total stockholders' equity 98,826 96,682
--------- ---------
$250,114 $246,826
========= =========
See accompanying notes to consolidated financial statements.
5
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
($ in thousands) 2000 1999
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $29,620 $24,637
Cash paid to employees, suppliers of goods
and others (14,029) (16,917)
Proceeds from sales and maturities of
investments 3,510 --
Interest received 328 405
Interest paid (207) (4,515)
Taxes paid (297) (832)
------ ------
Net cash provided by operating
activities 18,925 2,778
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of entity (3,740) --
Purchases of equipment and leasehold
improvements (1,252) (585)
Distributions from investments 748 1,064
Other (15) 466
------ ------
Net cash provided by (used in)
investing activities (4,259) 945
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 1,079 1,508
Payments on notes payable, exclusive
of interest (329) (406)
Distributions to minority interest (8,934) (9,200)
Contributions by minority interest 275 1,224
Purchases of treasury stock (1,516) (2,241)
Exercise of stock options, and sales
and purchases of put options 130 12
------ ------
Net cash used in financing activities (9,295) (9,103)
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 5,371 (5,380)
Cash and cash equivalents, beginning
of period 20,064 40,146
------ ------
Cash and cash equivalents, end of period $25,435 $34,766
====== ======
See accompanying notes to consolidated financial statements.
6
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
Three Months Ended
March 31,
($ in thousands) 2000 1999
------ ------
Reconciliation of net income to cash
provided by operating activities:
Net income $3,297 $3,162
Adjustments to reconcile net income
to cash provided by operating
activities
Minority interest in consolidated income 6,455 5,443
Depreciation and amortization 2,920 2,475
Provision for deferred income taxes 981 92
Equity in earnings of affiliates (874) (562)
Other 10 141
Changes in operating assets and liabilities,
net of effect of purchase transactions
Investments 3,481 --
Accounts receivable 1,333 156
Other receivables 931 (1,502)
Other assets (1,050) (1,257)
Accounts payable 273 (1,972)
Accrued expenses 1,168 (3,398)
------ ------
Total adjustments 15,628 (384)
------ ------
Net cash provided by operating activities $18,925 $2,778
====== ======
See accompanying notes to consolidated financial statements.
7
<PAGE>
FINANCIAL INFORMATION
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
1. General
- ----------
The accompanying unaudited consolidated financial statements have been prepared
in conformity with the accounting principles stated in the audited financial
statements for the year ended December 31, 1999 and reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
financial position as of March 31, 2000 and the results of operations for the
periods presented. These statements have not been audited by the Company's
independent certified public accountants. The operating results for the interim
periods are not necessarily indicative of results for the full fiscal year.
The notes to consolidated financial statements appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 filed with the
Securities Exchange Commission should be read in conjunction with this Quarterly
Report on Form 10-Q. There have been no significant changes in the information
reported in those notes other than from normal business activities of the
Company.
2. Earnings per share
- ---------------------
Basic EPS is based on weighted average shares outstanding without any dilutive
effects considered. Diluted EPS reflects dilution from all contingently issuable
shares, including options and warrants. A reconciliation of such EPS data is as
follows:
Basic Diluted
earnings earnings
($ in thousands, except per share data) per share per share
--------- ---------
Three Months Ended March 31, 2000
- ---------------------------------
Net income $3,297 $3,297
======= =======
Weighted average shares outstanding 16,435 16,435
Effect of dilutive securities -- 172
------- -------
Shares for EPS calculation 16,435 16,607
======= =======
Net income per share $0.20 $0.20
======= =======
Three Months Ended March 31, 1999
- ---------------------------------
Net income $3,162 $3,162
======= =======
Weighted average shares outstanding 17,387 17,387
Effect of dilutive securities -- 108
Shares for EPS calculation 17,387 17,495
======= =======
Net income per share $0.18 $0.18
======= =======
8
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 (continued)
(Unaudited)
2. Earnings per share (continued)
- ---------------------------------
Unexercised stock options and warrants to purchase 1,209,000 and 1,186,500
shares of the Company's common stock as of March 31, 2000 and 1999 were not
included in the computation of diluted EPS because the effect would be
antidilutive.
3. Segment Reporting
- --------------------
The Company has three reportable segments: lithotripsy, manufacturing and
refractive. The lithotripsy segment provides services related to the operation
of the lithotripters, including scheduling, staffing, training, quality
assurance, maintenance, regulatory compliance and contracting with payors,
hospitals and surgery centers. The manufacturing segment provides manufacturing
services and installation, upgrade, refurbishment and repair of major medical
equipment for mobile medical service providers. The refractive segment provides
services related to the operations of refractive vision correction centers.
Other operating segments, which do not meet the quantitative thresholds for
reportable segments, include prostatherapy services.
The Company measures performance based on the pretax income or loss from its
operating segments, which do not include unallocated corporate general and
administrative expenses and corporate interest revenue and expense.
<TABLE>
<S> <C> <C> <C> <C>
($ in thousands) Lithotripsy Manufacturing Refractive Other
---------- ------------- ---------- -----
Three Months Ended March 31, 2000
- ---------------------------------
Revenue from external customers $20,534 $5,527 $2,935 $447
Intersegment revenues -- 95 -- --
Segment profit 6,879 866 281 9
Three Months Ended March 31, 1999
- ---------------------------------
Revenue from external customers $21,409 $3,400 -- $573
Intersegment revenues -- 46 -- --
Segment profit (loss) 7,890 621 -- (18)
</TABLE>
9
<PAGE>
PRIME MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 (continued)
(Unaudited)
3. Segment Reporting (continued)
- --------------------------------
The following is a reconciliation of the measure of segment profit per above to
consolidated income before income taxes per the consolidated statements of
operations:
Three Months ended March 31,
($ in thousands) 2000 1999
------ ------
Total segment profit $8,035 $8,493
Unallocated corporate expenses:
General and administrative (956) (871)
Net interest expense (1,606) (1,939)
Loan fees (84) --
Other, net (29) (366)
Total unallocated corporate expenses (2,675) (3,176)
------ ------
Income before income taxes $5,360 $5,317
====== ======
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 warrants to
purchase 55,000 shares of common stock, and has accounted for this transaction
using the purchase method of accounting. Total goodwill recognized of $3,389,000
is being amortized over twenty five years. The proforma effects of this
acquisition is not material.
5. Condensed Financial Information Regarding Guarantor Subsidiaries
- -------------------------------------------------------------------
Condensed consolidating financial information regarding the Company, Guarantor
Subsidiaries and Non-guarantor Subsidiaries for March 31, 2000 and 1999 is
presented below for purposes of complying with the reporting requirements of the
Guarantor Subsidiaries. Separate financial statements and other disclosures
concerning each Guarantor Subsidiary have not been presented because management
has determined that such information is not material to investors. The Guarantor
Subsidiaries are wholly owned subsidiaries of the Company who have fully and
unconditionally guaranteed the 8.75% unsecured senior subordinated Notes.
10
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income
Three Months Ended March 31, 2000
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- -------------- -------------- -------------- --------------
Revenue:
Lithotripsy:
Fee revenues $ - $ 4,197 $ 14,873 $ - $ 19,070
Management fees - 523 371 - 894
Equity income 6,938 4,260 115 (10,743) 570
--------------- -------------- -------------- -------------- --------------
6,938 8,980 15,359 (10,743) 20,534
Manufacturing - - 5,527 - 5,527
Refractive 288 402 2,583 (338) 2,935
Prostatherapy - - 402 - 402
Other - 45 - - 45
--------------- -------------- -------------- -------------- --------------
Total revenue 7,226 9,427 23,871 (11,081) 29,443
--------------- -------------- -------------- -------------- --------------
Cost of services and general and
administrative expenses:
Lithotripsy - 348 5,047 - 5,395
Manufacturing - - 4,290 - 4,290
Refractive - - 1,501 - 1,501
Prostatherapy - (72) 431 - 359
Other - 50 - - 50
Corporate 9 947 - - 956
--------------- -------------- -------------- -------------- --------------
9 1,273 11,269 - 12,551
Depreciation and amortization - 1,432 1,488 - 2,920
--------------- -------------- -------------- -------------- --------------
9 2,705 12,757 - 15,471
--------------- -------------- -------------- -------------- --------------
Operating income 7,217 6,722 11,114 (11,081) 13,972
--------------- -------------- -------------- -------------- --------------
Other income (deductions):
Interest and dividends 149 99 110 - 358
Interest expense (2,259) 407 (574) - (2,426)
Loan fees (84) - - - (84)
Other, net (3) (2) - - (5)
--------------- -------------- -------------- -------------- --------------
Total other income (deductions) (2,197) 504 (464) - (2,157)
--------------- -------------- -------------- -------------- --------------
Income before provision for income
taxes and minority interest 5,020 7,226 10,650 (11,081) 11,815
Minority interest in consolidated income - - - 6,455 6,455
Provision for income taxes 1,723 - 340 - 2,063
--------------- -------------- -------------- -------------- --------------
Net income $ 3,297 $ 7,226 $ 10,310 $ (17,536) $ 3,297
=============== ============== ============== ============== ==============
</TABLE>
11
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income
Three Months Ended March 31, 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 $ - $ 5,009 $ 14,487 $ - $ 19,496
Management fees - 789 562 1,351
Equity income 7,999 4,434 - (11,871) 562
--------------- -------------- -------------- -------------- --------------
7,999 10,232 15,049 (11,871) 21,409
Manufacturing - - 3,400 - 3,400
Prostatherapy - - 518 - 518
Other - 55 - - 55
--------------- -------------- -------------- -------------- --------------
Total revenue 7,999 10,287 18,967 (11,871) 25,382
--------------- -------------- -------------- -------------- --------------
Cost of services and general and
administrative expenses:
Lithotripsy - 545 5,497 - 6,042
Manufacturing - - 2,454 - 2,454
Prostatherapy - - 457 - 457
Other - 61 - - 61
Corporate 29 842 - - 871
--------------- -------------- -------------- -------------- --------------
29 1,448 8,408 - 9,885
Depreciation and amortization 2 1,206 1,267 - 2,475
--------------- -------------- -------------- -------------- --------------
Total operating expenses 31 2,654 9,675 - 12,360
--------------- -------------- -------------- -------------- --------------
Operating income 7,968 7,633 9,292 (11,871) 13,022
--------------- -------------- -------------- -------------- --------------
Other income (deductions):
Interest and dividends 205 139 61 - 405
Interest expense (2,281) - (48) - (2,329)
Other, net (607) 265 4 - (338)
--------------- -------------- -------------- -------------- --------------
Total other income (deductions) (2,683) 404 17 - (2,262)
--------------- -------------- -------------- -------------- --------------
Income before provision for income
taxes and minority interest 5,285 8,037 9,309 (11,871) 10,760
Minority interest in consolidated income - - - 5,443 5,443
Provision for income taxes 2,123 38 (6) - 2,155
--------------- -------------- -------------- -------------- --------------
Net income $ 3,162 $ 7,999 $ 9,315 $ (17,314) $ 3,162
=============== ============== ============== ============== ==============
</TABLE>
12
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet
March 31, 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 $ 9,417 $ 12,465 $ 3,553 $ - $ 25,435
Investments 639 - - - 639
Accounts receivable, net - 2,977 18,941 - 21,918
Other receivables 291 1,237 1,032 - 2,560
Deferred income taxes 15 972 - - 987
Prepaid expenses and other current 35 418 1,394 - 1,847
Inventory - - 4,906 - 4,906
--------------- -------------- -------------- -------------- --------------
Total current assets 10,397 18,069 29,826 - 58,292
--------------- -------------- -------------- -------------- --------------
Property and equipment:
Equipment, furniture and fixtures - 5,642 38,124 - 43,766
Building and leasehold improvements - 533 1,694 - 2,227
--------------- -------------- -------------- -------------- --------------
- 6,175 39,818 - 45,993
Less accumulated depreciation
and amortization - (4,581) (22,300) - (26,881)
--------------- -------------- -------------- -------------- --------------
Property and equipment, net - 1,594 17,518 - 19,112
--------------- -------------- -------------- -------------- --------------
Investment in subsidiaries
and other investments 196,801 42,123 - (219,979) 18,945
Goodwill, at cost, net of amortization - 142,375 8,995 - 151,370
Other noncurrent assets 362 680 1,353 - 2,395
--------------- -------------- -------------- -------------- --------------
$ 207,560 $ 204,841 $ 57,692 $ (219,979) $ 250,114
=============== ============== ============== ============== ==============
LIABILITIES
Current liabilities:
Current portion of long-term debt $ - $ - $ 1,822 $ - $ 1,822
Accounts payable 151 2,157 1,256 - 3,564
Accrued expenses 6,144 858 6,554 - 13,556
--------------- -------------- -------------- -------------- --------------
Total current liabilities 6,295 3,015 9,632 - 18,942
Long-term debt, net of current portion 100,000 162 4,313 - 104,475
Deferred income taxes 2,439 4,863 - - 7,302
--------------- -------------- -------------- -------------- --------------
Total liabilities 108,734 8,040 13,945 - 130,719
--------------- -------------- -------------- -------------- --------------
Minority interest - - - 20,569 20,569
STOCKHOLDERS' EQUITY
Common stock 194 - - - 194
Capital in excess of par value 88,019 - - - 88,019
Accumulated earnings 36,951 - - - 36,951
Treasury stock (26,338) - - - (26,338)
Subsidiary net equity - 196,801 43,747 (240,548) -
--------------- -------------- -------------- -------------- --------------
Total stockholders' equity 98,826 196,801 43,747 (240,548) 98,826
--------------- -------------- -------------- -------------- --------------
$ 207,560 $ 204,841 $ 57,692 $ (219,979) $ 250,114
=============== ============== ============== ============== ==============
</TABLE>
13
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 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
operating activities $ 1,988 $ 15,494 $ 1,443 $ - $ 18,925
--------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of entity - (3,740) - - (3,740)
Purchases of equipment and leasehold
improvements - (198) (1,054) - (1,252)
Distributions from subsidiaries 6,772 4,251 - (11,023) -
Distributions from investments - 748 - - 748
Other - - (15) - (15)
--------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
investing activities 6,772 1,061 (1,069) (11,023) (4,259)
--------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable - - 1,079 - 1,079
Payments on notes payable exclusive of
interest - - (329) - (329)
Contributions by minority interest - - 275 - 275
Distributions to minority interest - - - (8,934) (8,934)
Exercise of stock options, and sales and
purchases of put options 130 - - - 130
Purchases of treasury stock (1,516) - - - (1,516)
Distributions to equity owners - (6,772) (13,185) 19,957 -
--------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
financing activities (1,386) (6,772) (12,160) 11,023 (9,295)
--------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 7,374 9,783 (11,786) - 5,371
Cash and cash equivalents, beginning
of period 2,043 2,682 15,339 - 20,064
--------------- -------------- -------------- -------------- --------------
Cash and cash equivalents, end of period $ 9,417 $ 12,465 $ 3,553 $ - $ 25,435
=============== ============== ============== ============== ==============
</TABLE>
14
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 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 $ (5,503) $ 1,947 $ 6,334 $ - $ 2,778
--------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold
improvements - (114) (471) - (585)
Distributions from subsidiaries 7,551 4,864 - (12,415) -
Distributions from investments - 1,064 - - 1,064
Other - (105) 571 - 466
--------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
investing activities 7,551 5,709 100 (12,415) 945
--------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable - - 1,508 - 1,508
Payments on notes payable exclusive of
interest - - (406) - (406)
Distributions to minority interest - - - (9,200) (9,200)
Contributions by minority interest - - 1,224 - 1,224
Purchases of treasury stock (2,241) - - - (2,241)
Other 12 - - - 12
Distributions to equity owners - (7,551) (14,064) 21,615 -
--------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
financing activities (2,229) (7,551) (11,738) 12,415 (9,103)
--------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (181) 105 (5,304) - (5,380)
Cash and cash equivalents, beginning
of period 15,798 7,585 16,763 - 40,146
--------------- -------------- -------------- -------------- --------------
Cash and cash equivalents, end of period $ 15,617 $ 7,690 $ 11,459 $ - $ 34,766
=============== ============== ============== ============== ==============
</TABLE>
15
<PAGE>
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
Revenues
- --------
Total revenues for the three months ended March 31, 2000 increased $4,061,000
(16%) as compared to the same period in 1999. Revenues from lithotripter
operations decreased by $875,000 (4%). Renegotiation of contracts during the
past year resulted in decreases in average revenue per procedure; however, these
decreases have been partially offset by increases in procedures performed, which
the Company believes is indicative of its market share preservation. Revenues
from manufacturing increased $2,127,000 (63%) due to increased sales of MRI
trailers as well as expansion into manufacturing and sales of cardiac
catheterization labs. Revenues from refractive services were $2,935,000, due to
procedure growth and the acquisition of 60% of the Mann Berkeley Caplan Laser
Center effective March 1, 2000. Revenues from prostatherapy operations declined
$116,000 (22%) due to lower procedure volume. During the second quarter Prime
will be upgrading the Prostatron software which will reduce procedure time from
over an hour to 30 minutes.
Expenses
- --------
Costs and expenses (excluding depreciation and amortization) for three months
ended March 31, 2000 increased from 39% to 43% of revenues, primarily due to
increases in the manufacturing and refractive operations, both of which have
lower margins than the lithotripsy operations. Cost of services and general and
administrative expenses associated with manufacturing increased $1,836,000 (75%)
due to increased sales. Costs of services associated with lithotripsy operations
decreased $647,000 (11%) in absolute terms and decreased from 28% to 26% of
lithotripsy revenues primarily due to the writeoff of start up costs incurred
during the quarter ended March 31, 1999. Cost of services associated with
prostatherapy operations decreased $98,000 (21%) due to lower procedure volume,
partially offset by the writeoff of start up costs associated with the formation
of a new prostatherapy partnership. Corporate expenses remained constant at 3%
of revenues, increasing $85,000 (10%) in absolute terms, as the Company
continues to successfully grow without proportionately adding corporate
overhead.
Other Income (Deductions)
- -------------------------
Other deductions for the three months ended March 31, 2000 decreased $105,000
(5%) compared to the same period in 1999, primarily due to the 1999 writeoff of
costs related to a proposed acquisition that was not consummated, partially
offset by expense of $84,000 related to a restructuring of the Company's $100
million revolving credit facility and a $97,000 increase in interest expense due
to higher outstanding debt balances in the first quarter of 2000 compared to the
same period in 1999.
Minority Interest In Consolidated Income
- ----------------------------------------
Minority interest in consolidated income for the three months ended March 31,
2000 increased $1,012,000 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 $7,377,000 for the
three months ended March 31, 2000 compared to $6,236,000 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.
16
<PAGE>
Provision for income taxes
- --------------------------
Provision for income taxes for the three months ended March 31, 2000 decreased
$92,000 compared to the same period in 1999 due to a decrease in the effective
tax rate.
Liquidity and Capital Resources
- -------------------------------
Cash was $25,435,000 and $20,064,000 at March 31, 2000 and December 31, 1999,
respectively. Cash provided by operations for the quarter ended March 31, 2000
was $18,925,000 compared to cash provided by operations for the quarter ended
March 31, 1999 of $2,778,000. The increase was attributable to increased
operations, the timing of accounts receivable collections and accounts payable,
accrued expense and income tax payments, as well as proceeds received from sales
and maturities of investments of $3,510,000.
Cash used in investing activities for the quarter ended March 31, 2000 was
$4,259,000 compared to cash provided by investing activities for the quarter
ended March 31, 1999 of $945,000. The decrease was attributable to the
acquisition of 60% of the Mann Berkeley Caplan Laser Center and an increase in
the purchase of equipment. Cash used in financing activities for the quarter
ended March 31, 2000 was $9,295,000 compared to cash used for financing
activities for the quarter ended March 31, 1999 of $9,103,000. The increase in
cash used was primarily due to a decrease in contributions provided by minority
interest partially offset by a decrease of cash used to purchase treasury stock.
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 March 31, 2000 and April 30, 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 RVC operations through both
acquisitions and development. The Company intends to fund the purchase price for
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 3,172,900 shares of stock for a total of $27,384,000 as of April 30,
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.
17
<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.
18
<PAGE>
PART II
OTHER INFORMATION
19
<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
20
<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: May 12, 2000 By: /s/ Cheryl L. Williams
----------------------
Cheryl L. Williams, Senior Vice President
and Chief Financial Officer
21
<PAGE>
EXHIBIT 12
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
EXHIBIT 12
<TABLE>
<S> <C> <C>
($ in thousands) Three Months Ended March 31,
2000 1999
------- -------
Income before income taxes and
after minority interest $5,360 $5,317
Undistributed equity income (102) (58)
Minority interest income of subsidiaries
with fixed charges 2,643 355
------- -------
Adjusted earnings 7,901 5,614
------- -------
Interest on debt 2,426 2,329
Loan fees 84 --
------- -------
Total fixed charges 2,510 2,329
------- -------
Total available earnings before fixed charges $10,411 $7,943
======= =======
Ratio 4.1 3.4
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the March 31, 2000 Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 25,435
<SECURITIES> 639
<RECEIVABLES> 21,918
<ALLOWANCES> 246
<INVENTORY> 4,906
<CURRENT-ASSETS> 58,292
<PP&E> 45,993
<DEPRECIATION> 26,881
<TOTAL-ASSETS> 250,114
<CURRENT-LIABILITIES> 18,942
<BONDS> 0
0
0
<COMMON> 194
<OTHER-SE> 98,632
<TOTAL-LIABILITY-AND-EQUITY> 250,114
<SALES> 0
<TOTAL-REVENUES> 29,443
<CGS> 0
<TOTAL-COSTS> 12,551
<OTHER-EXPENSES> 2,920
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,426
<INCOME-PRETAX> 5,360
<INCOME-TAX> 2,063
<INCOME-CONTINUING> 3,297
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,297
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.20
</TABLE>
