UNITED STATES
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 May 31, 2003 |
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 0-20554
DYNACQ INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| NEVADA | 76-0375477 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 10304 INTERSTATE 10 EAST, SUITE 369, HOUSTON, TEXAS |
77029 | |
| (address of principal executive offices) | Zip Code |
Registrants telephone number, including area code (713) 673-6432
N/A
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes x No ¨
Indicate by checkmark whether registrant is an accelerated filer Yes x No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable dates.
| Title of Each Class |
Outstanding at June 30, 2003 | |
| Common Stock, $0.001 par value |
14,786,079 shares |
Transitional Small Business Disclosure Format (check one) Yes ¨ No x
PART I – FINANCIAL INFORMATION
ITEM I – FINANCIAL STATEMENTS
DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| MAY 31, 2003 |
AUGUST 31, 2002 |
|||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 4,141,594 | $ | 7,583,756 | ||||
| Accounts receivables, net of allowances for contractual adjustments and uncollectible accounts of approximately $86,883,000 and $58,010,000 at May 31, 2003 and August 31, 2002, respectively |
32,020,645 | 24,340,971 | ||||||
| Supplies |
1,658,765 | 893,727 | ||||||
| Prepaid expenses |
331,188 | 262,958 | ||||||
| Deferred tax asset |
149,295 | 149,295 | ||||||
| Income taxes receivable |
1,652,372 | 373,575 | ||||||
| Total current assets |
39,953,859 | 33,604,282 | ||||||
| Property and equipment, net |
31,565,516 | 16,715,425 | ||||||
| Goodwill |
483,944 | 483,944 | ||||||
| Other assets |
465,916 | 274,970 | ||||||
| Total assets |
$ | 72,469,235 | $ | 51,078,621 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 3,235,472 | $ | 2,327,410 | ||||
| Accrued liabilities |
5,178,157 | 744,530 | ||||||
| Current maturities of long-term debt |
— | 39,075 | ||||||
| Total current liabilities |
8,413,629 | 3,111,015 | ||||||
| Negative goodwill, net |
— | 851,859 | ||||||
| Deferred income taxes |
483,219 | 483,219 | ||||||
| Total noncurrent liabilities |
483,219 | 1,335,078 | ||||||
| Commitments and contingencies |
||||||||
| Minority interests |
3,958,219 | 2,064,155 | ||||||
| Stockholders’ equity |
||||||||
| Preferred stock, $0.01 par value, 5,000,000 shares authorized, none issued or outstanding |
— | — | ||||||
| Preferred stock dividend distributable |
1,189 | — | ||||||
| Common stock, $0.001 par value, 300,000,000 shares authorized, 16,577,746 and 16,515,166 shares issued at May 31, 2003 and August 31, 2002, respectively |
16,578 | 16,515 | ||||||
| Additional paid in capital |
12,047,478 | 9,778,701 | ||||||
| Retained earnings |
50,900,247 | 37,884,622 | ||||||
| Treasury stock, 1,711,623 shares at cost |
(2,271,152 | ) | (1,959,412 | ) | ||||
| Deferred compensation |
(1,080,172 | ) | (1,152,053 | ) | ||||
| Total stockholders’ equity |
59,614,168 | 44,568,373 | ||||||
| Total liabilities and stockholders’ equity |
$ | 72,469,235 | $ | 51,078,621 | ||||
See accompanying notes
2
DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
| THREE MONTHS ENDED MAY 31, |
NINE MONTHS ENDED MAY 31, |
||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
||||||||||||
| Net patient service revenue |
$ | 25,606,146 | $ | 19,584,545 | $ | 64,667,579 | $ | 48,297,084 | |||||||
| Costs and expenses: |
|||||||||||||||
| Compensation and benefits |
4,679,298 | 2,299,201 | 10,622,069 | 6,122,792 | |||||||||||
| Medical services and supplies |
4,021,744 | 5,434,386 | 11,006,021 | 11,504,442 | |||||||||||
| Other operating expenses |
5,028,335 | 4,324,636 | 14,613,319 | 10,966,176 | |||||||||||
| Provision for uncollectible accounts |
156,217 | 175,551 | 382,441 | 305,574 | |||||||||||
| Depreciation & amortization |
720,857 | 355,827 | 1,558,507 | 949,684 | |||||||||||
| Total costs and expenses |
14,606,451 | 12,589,601 | 38,182,357 | 29,848,668 | |||||||||||
| Income from operations |
10,999,695 | 6,994,944 | 26,485,222 | 18,448,416 | |||||||||||
| Other income (expense): |
|||||||||||||||
| Rent and other income (expense) |
235,251 | (26,248 | ) | 434,318 | 59,445 | ||||||||||
| Interest income |
8,230 | 63,454 | 66,841 | 156,046 | |||||||||||
| Interest expense |
— | (9,853 | ) | (940 | ) | (26,806 | ) | ||||||||
| Total other income |
243,481 | 27,353 | 500,219 | 188,685 | |||||||||||
| Income before income taxes, minority interests, and cumulative effect of a change in accounting principle |
11,243,176 | 7,022,297 | 26,985,441 | 18,637,101 | |||||||||||
| Provision for income taxes |
4,163,956 | 2,230,442 | 9,710,958 | 5,888,338 | |||||||||||
| Minority interests in earnings |
801,962 | 664,690 | 2,630,064 | 1,701,956 | |||||||||||
| Income before cumulative effect of a change in accounting principle |
6,277,258 | 4,127,165 | 14,644,419 | 11,046,807 | |||||||||||
| Cumulative effect of a change in accounting principle, net of tax |
— | — | 528,153 | — | |||||||||||
| Net income |
$ | 6,277,258 | $ | 4,127,165 | $ | 15,172,572 | $ | 11,046,807 | |||||||
| Basic earnings per common share: |
|||||||||||||||
| Income before cumulative effect of a change in accounting principle |
$ | 0.42 | $ | 0.28 | $ | 0.98 | $ | 0.75 | |||||||
| Cumulative effect of a change in accounting principle, net of tax |
— | — | 0.04 | — | |||||||||||
| Net income |
$ | 0.42 | $ | 0.28 | $ | 1.02 | $ | 0.75 | |||||||
| Diluted earnings per common share: |
|||||||||||||||
| Income before cumulative effect of a change in accounting principle |
$ | 0.40 | $ | 0.27 | $ | 0.94 | $ | 0.73 | |||||||
| Cumulative effect of a change in accounting principle, net of tax |
— | — | 0.03 | — | |||||||||||
| Net income |
$ | 0.40 | $ | 0.27 | $ | 0.97 | $ | 0.73 | |||||||
| Weighted average common shares—Basic |
14,875,100 | 14,797,989 | 14,860,739 | 14,797,989 | |||||||||||
| Weighted average common shares—Diluted |
15,573,752 | 15,057,681 | 15,555,003 | 15,057,681 | |||||||||||
See accompanying notes
DYNACQ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
| NINE MONTHS ENDED MAY 31, |
||||||||
| 2003 |
2002 |
|||||||
| Net Income |
$ | 15,172,572 | $ | 11,046,807 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
1,558,507 | 949,684 | ||||||
| Cumulative effect of a change in accounting principle-write-off negative goodwill, net of tax |
(528,153 | ) | — | |||||
| Gain on sale of residential property |
(145,623 | ) | — | |||||
| Provision for uncollectible accounts |
382,441 | — | ||||||
| Minority interests |
2,630,064 | 1,701,956 | ||||||
| Deferred compensation amortization |
312,721 | 78,060 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
(8,062,115 | ) | (2,320,684 | ) | ||||
| Supplies |
(765,038 | ) | 39,481 | |||||
| Prepaid expenses |
(68,230 | ) | (105,305 | ) | ||||
| Income tax receivable |
(1,602,503 | ) | — | |||||
| Other assets |
(190,946 | ) | (109,615 | ) | ||||
| Accounts payable |
908,062 | 311,175 | ||||||
| Accrued liabilities |
4,433,627 | 347,178 | ||||||
| Income taxes payable |
— | (3,246,620 | ) | |||||
| Net cash provided by operating activities |
14,035,386 | 8,692,117 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment, net |
(16,574,715 | ) | (5,332,971 | ) | ||||
| Proceeds from sale of residential property |
311,740 | — | ||||||
| Due from related parties |
— | 1,585,000 | ||||||
| Net cash used in investing activities |
(16,262,975 | ) | (3,747,971 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Principal payments on long-term debt |
(39,075 | ) | (680,346 | ) | ||||
| Proceeds from exercise of stock options |
306,169 | 1,360,524 | ||||||
| Acquisition of treasury stock, net |
(311,740 | ) | (768,905 | ) | ||||
| Payment of cash dividends |
(433,927 | ) | ||||||