-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NuM6r0jUQBx2U9fMqKMK2x0SLzstv4l2tl2ubY4sZaUES6f8OjCliNJY0/SFr9QZ KR+x0WqmJuMcUhCJb2brOQ== 0000950149-99-000915.txt : 19990513 0000950149-99-000915.hdr.sgml : 19990513 ACCESSION NUMBER: 0000950149-99-000915 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN SHARED HOSPITAL SERVICES CENTRAL INDEX KEY: 0000744825 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 942918118 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08789 FILM NUMBER: 99618439 BUSINESS ADDRESS: STREET 1: 4 EMARCADERO CENTER STE 3620 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4157885300 MAIL ADDRESS: STREET 1: 4 EMBARCADERO CENTER CITY: SAN FRANCISCO STATE: CA ZIP: 94111 10-Q 1 QUARTERLY REPORT FOR THE PERIOD ENDED 3/31/99 1 ---------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 OR [ ] 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 1-8789 AMERICAN SHARED HOSPITAL SERVICES ------------------------------------------------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 94-2918118 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) FOUR EMBARCADERO CENTER, SUITE 3620, SAN FRANCISCO, CALIFORNIA 94111 - -------------------------------------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 788-5300 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 --- --- AS OF MAY 3, 1999: THERE ARE OUTSTANDING 3,904,572 SHARES OF THE REGISTRANT'S COMMON STOCK. -1- 2 AMERICAN SHARED HOSPITAL SERVICES PART I - FINANCIAL INFORMATION - CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (audited) ASSETS Mar. 31, 1999 Dec. 31, 1998 ------------- ------------- Current assets: Cash and cash equivalents $ 8,772,000 $ 11,114,000 Restricted cash 2,299,000 2,226,000 Receivables, less allowance for uncollectible accounts of $0 in 1999 and 1998 Trade accounts receivable 1,000,000 1,228,000 Other 235,000 104,000 ------------ ------------ 1,235,000 1,332,000 Prepaid expenses, inventories and other current assets 204,000 285,000 ------------ ------------ TOTAL CURRENT ASSETS 12,510,000 14,957,000 Property and equipment: Land, buildings & improvements 247,000 247,000 Medical and transportation equipment 15,470,000 15,447,000 Capitalized leased equipment 83,000 83,000 Deposits and construction in progress 2,123,000 1,079,000 ------------ ------------ 17,923,000 16,856,000 Accumulated depreciation and amortization (5,475,000) (5,097,000) ------------ ------------ Net property & equipment 12,448,000 11,759,000 Other assets 199,000 183,000 Deferred taxes, net of allowance 80,000 0 Intangible assets, less accumulated amortization 18,000 20,000 ------------ ------------ TOTAL ASSETS $ 25,255,000 $ 26,919,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY -------------------- Current liabilities: Accounts payable $ 515,000 $ 338,000 Interest payable 108,000 54,000 Employee compensation 226,000 814,000 Other accrued liabilities 429,000 519,000 Accrued exit costs 478,000 595,000 Income taxes payable 508,000 1,664,000 Current portion of long-term debt 1,647,000 1,873,000 Current portion of obligations under capital leases 12,000 12,000 ------------ ------------ TOTAL CURRENT LIABILITIES 3,923,000 5,869,000 Long-term debt, less current portion 9,504,000 8,792,000 Obligation under capital leases, less current portion 30,000 31,000 Accrued exit costs, less current portion 375,000 400,000 Minority interest 631,000 731,000 Shareholders' equity: Common stock,without par value: authorized shares - 10,000,000; issued & outstanding shares, 3,909,000 in 1999 and 4,544,000 in 1998 10,408,000 11,087,000 Common stock options issued to officer 2,414,000 2,414,000 Additional paid-in capital 817,000 930,000 Accumulated deficit (2,847,000) (3,335,000) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 10,792,000 11,096,000 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 25,255,000 $ 26,919,000 ============ ============
See Accompanying Notes. -2- 3 AMERICAN SHARED HOSPITAL SERVICES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months ended March 31, 1999 1998 ----------- ----------- REVENUES: Medical services $ 1,566,000 $ 9,322,000 COSTS AND EXPENSES Costs of operations: Medical services payroll 4,000 1,951,000 Maintenance and supplies 28,000 1,425,000 Depreciation and amortization 381,000 1,454,000 Equipment rental 0 938,000 Other 58,000 1,151,000 ----------- ----------- 471,000 6,919,000 Selling and administrative 426,000 1,357,000 Interest 255,000 836,000 ----------- ----------- Total costs and expenses 1,152,000 9,112,000 ----------- ----------- 414,000 210,000 Gain (Loss) on sale of assets and early termination of capital leases 0 (6,000) Interest and other income 29,000 1,000 ----------- ----------- Income before income taxes 443,000 205,000 Income tax benefit 45,000 0 ----------- ----------- Net income $ 488,000 $ 205,000 =========== =========== Earnings per common share: Earnings per common share - basic $ 0.11 $ 0.04 =========== =========== Earnings per common share - assuming dilution $ 0.08 $ 0.03 =========== ===========
See Accompanying Notes -3- 4 AMERICAN SHARED HOSPITAL SERVICES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Three Months ended March 31, 1999 1998 ------------ ------------ OPERATING ACTIVITIES: Net income $ 488,000 $ 205,000 Adjustment to reconcile net income to net cash provided by (used in) operating activities: Disposal of property and equipment 0 6,000 Depreciation and amortization 380,000 1,537,000 Changes in operating assets and liabilities: (Increase) in restricted cash (73,000) (224,000) Decrease in accounts receivable 97,000 541,000 (Increase) decrease in prepaid expenses, inventories and other assets (15,000) 82,000 (Decrease) increase in accounts payable and accrued liabilities (1,745,000) 1,143,000 ------------ ------------ Net cash (used in) provided by operating activities (868,000) 3,290,000 INVESTING ACTIVITIES: Purchase of property and equipment (net of financing) (67,000) (42,000) Proceeds from sale of property and equipment 0 1,000 (Decrease) increase in minority interest (100,000) 11,000 Other 0 (131,000) ------------ ------------ Net cash (used in) investing activities (167,000) (161,000) FINANCING ACTIVITIES: Payment for repurchase of stock (792,000) 0 Net (payments) on revolving line of credit 0 (888,000) Principal payments on long-term debt and capitalized leases (515,000) (2,234,000) ------------ ------------ Net cash (used in) financing activities (1,307,000) (3,122,000) ------------ ------------ Net (decrease) increase in cash and cash equivalents (2,342,000) 7,000 Cash and cash equivalents at beginning of period 11,114,000 17,000 ------------ ------------ Cash and cash equivalents at end of period $ 8,772,000 $ 24,000 ============ ============ SUPPLEMENTAL CASH FLOW DISCLOSURE: Cash paid during the period for: Interest $ 201,000 $ 828,000 Income taxes $ 1,192,000 $ 19,000
See Accompanying Notes -4- 5 AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly American Shared Hospital Services' (the "Company") consolidated financial position as of March 31, 1999 and the results of its operations for the three month periods ended March 31, 1999 and 1998, which results are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 1998 have been derived from audited financial statements. These financial statements include the accounts of the Company and its wholly- owned subsidiaries: CuraCare, Inc.; MMRI, Inc.; European Shared Medical Services Limited; American Shared Radiosurgery Services; African American Church Health and Economic Services, Inc.; ACHES Insurance Services, Inc.; and the Company's majority-owned subsidiary, GK Financing, LLC. American Shared Hospital Services ("the Company") through its majority-owned subsidiary, GK Financing, LLC, provides Gamma Knife units to five medical centers in California, Texas, and Connecticut. The Company provided shared diagnostic imaging services to health care providers located in various geographic regions of the United States through November of 1998. The five diagnostic imaging services provided by the Company were Magnetic Resonance Imaging (MRI), Computed Axial Topography Scanning (CT), Ultrasound, Nuclear Medicine, and Cardiac Catheterization Laboratory services. On November 13, 1998, the stock of Curacare, Inc. and the assets of the diagnostic imaging services product line were sold to a third party ("Sale"). All significant intercompany accounts and transactions have been eliminated in consolidation. Note 2. Per Share Amounts Per share information has been computed based on the weighted average number of common shares and dilutive common share equivalents outstanding. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Medical services revenues decreased $7,756,000 for the three month period ended March 31, 1999 from $9,322,000 for the three month period ended March 31,1998. Revenues from Gamma Knife services increased $930,000 for the three month period ended March 31, 1999 compared to the same period in the prior year. The increase reflects increased utilization at centers in operation for longer than one year (58%) and the addition of two new Gamma Knife units. Diagnostic imaging services (MRI, CT, Ultrasound and Nuclear Medicine) and contract service (Cardiac Catheterization Laboratory and Respiratory Therapy) revenues decreased $8,686,000 for the three month period ended March 31, 1999 compared to the same period in the prior year, due to the Sale. -5- 6 Total costs of operations decreased $6,448,000 for the three month period ended March 31, 1999 compared to the same period in the prior year. Medical services payroll decreased $1,947,000 for the three month period ended March 31, 1999 compared to the same period in the prior year. The decrease is attributable to the Sale and the fact that the Company does not currently provide labor as a component of its Gamma Knife services. Maintenance and supplies decreased $1,397,000 for the three month period ended March 31, 1999 compared to the same period in the prior year due to the Sale. Maintenance and supplies for Gamma Knife services increased $9,000 for the three month period ended March 31, 1999 compared to the same period in the prior year primarily due to the expiration of the warranty period of a unit. Depreciation and amortization decreased $1,073,000 for the three month period ended March 31, 1999 compared to the same period in the prior year due to the Sale. Depreciation and amortization for Gamma Knife services increased $219,000 primarily due to two additional units in 1999. Equipment rental decreased $938,000 for the three month period ended March 31, 1999 compared to the same period in the prior year due to the Sale. Gamma Knife services had zero equipment rental expenses. Other operating costs decreased $1,093,000 for the three month period ended March 31, 1999 compared to the same period in the prior year due to the Sale. Other operating costs for Gamma Knife services increased approximately $10,000 primarily due to an increase in insurance and tax expenses. Selling and administrative costs decreased $931,000 for the three month period ended March 31, 1999 compared to the same period in the prior year primarily due to personnel reductions in the areas of sales and marketing, accounting and finance and administration and the other expenses related to those functions. The Year 2000 ("Y2K") issue results from programs written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculations causing disruption of operations, including among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Due to the Sale, the Company is in the process of downsizing its computer operations. The Company is in the process of replacing and upgrading much of its computer hardware and programs with equipment and programs that are Y2K compatible. This replacement and upgrade process is expected to be completed in the second quarter of 1999 and the cost is not expected to exceed $70,000. The Company's current revenue source, the Gamma Knife, is Y2K compliant. The Company's five current operational customers, which are large urban medical centers, all have disbursement systems that are or will be Y2K compliant during 1999. Should the disbursement systems of the Company's operating customers not be Y2K compliant, the Company would be materially impacted. The Company would exercise its contractual rights due to nonpayment, if necessary. The Company believes that the Y2K issue, except for any customer disbursement systems which are not Y2K compliant on January 1, 2000, and for which the customer cannot produce manual -6- 7 checks, will not materially affect the Company's business, results of operations, or financial condition. Interest expense decreased $581,000 for the three month period ending March 31, 1999 compared to the same period in the prior year due to the Sale. Interest expense for Gamma Knife services increased $148,000 primarily due to the addition of two additional units. Interest and other income increased $28,000 for the three month period ending March 31, 1999 compared to the same period in the prior year. Interest income in first quarter 1999 was approximately $119,000 and was offset by a charge for minority interest of approximately $90,000. The Company realized a net income tax benefit of $45,000 for the three month period ending March 31, 1999 compared to the same period in the prior year. The federal income tax benefit of $80,000 was offest by state income taxes of $35,000. The Company had net income of $488,000 ($0.11 per basic share) for the three month period ended March 31, 1999 compared to net income of $205,000 ($.04 per basic share) in the same period in the prior year. The increase was primarily due to increased operating margins. The Company's operating margin (Medical services revenues less Costs of operations) as a percentage of Medical services revenues increased from 26% in first quarter 1998 to 70% in first quarter 1999. Liquidity and Capital Resources The Company had cash and cash equivalents of $8,772,000 at March 31, 1999 compared to $11,114,000 at December 31, 1998. The Company's cash position decreased $2,342,000 due primarily to the payment of federal and state income taxes ($1,192,000) primarily related to the Sale, Company's repurchase of common stock ($792,000) and the payment of accounts payable and accrued liabilities. An additional $1,000,000 is classified under Restricted cash until April 15, 1999 under the terms of the Sale. The $1,000,000 was released from restriction on April 16, 1999. Restricted cash of $2,299,000 at March 31, 1999 and $2,226,000 at December 31, 1998 reflects cash that may only be used for the operations of GK Financing, LLC (GKF) and the $1,000,000 previously described as restricted under terms of the Sale. The increase in Restricted cash of $73,000 is primarily due to cash flow from Gamma Knife operations. The increase in Restricted cash was lessened by GKF's cash distributions of $810,000 to the Company and $190,000 to the other member of GKF in the first quarter of 1999. The Company as of March 31, 1999 had shareholders' equity of approximately $10,800,000, working capital of approximately $8,600,000 and total assets of approximately $25,300,000. The Company is investing its cash in overnight repurchase agreements and commercial paper pending use in the Company's operations. The Company believes its cash position combined with its working capital is adequate to service the Company's cash requirements in 1999. -7- 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Securities Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits The following exhibit is filed herewith:
Exhibit Number Description -------------- ----------- 27 Financial Data Schedule
(b) Reports on Form 8-K Report on Form 8-K dated March 22, 1999 (reporting adoption of a Shareholder Rights Plan) -8- 9 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. AMERICAN SHARED HOSPITAL SERVICES Registrant Date: May 12, 1999 /s/ Ernest A. Bates ---------------------------------------- Ernest A. Bates, M.D. Chairman of the Board and Chief Executive Officer Date: May 12, 1999 /s/ Craig K. Tagawa ---------------------------------------- Craig K. Tagawa Senior Vice President Chief Operating and Financial Officer -9- 10 INDEX OF EXHIBITS
Exhibit Number Description -------------- ----------- 27 Financial Data Schedule
-10- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 11,071 0 1,235 0 0 12,510 17,923 5,475 25,255 3,923 9,534 10,408 0 0 3,231 25,255 1,566 1,566 0 471 426 0 255 443 (45) 488 0 0 0 488 .11 .08
-----END PRIVACY-ENHANCED MESSAGE-----