-----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, WgHn/grDCbVyMXIHQDAcI1uulVnswmBa1WJ2c07+DXZzoJd4YsZmgyQdImJwb6HM ITgHN/HgxHVkOnVSIATYQg== 0000950123-96-002409.txt : 19960603 0000950123-96-002409.hdr.sgml : 19960603 ACCESSION NUMBER: 0000950123-96-002409 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATASCOPE CORP CENTRAL INDEX KEY: 0000027096 STANDARD INDUSTRIAL CLASSIFICATION: 3845 IRS NUMBER: 132529596 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06516 FILM NUMBER: 96565801 BUSINESS ADDRESS: STREET 1: 14 PHILLIPS PKWY CITY: MONTVALE STATE: NJ ZIP: 07645-9998 BUSINESS PHONE: 2013918100 MAIL ADDRESS: STREET 1: 14 PHILIPS PARKWAY CITY: MONTVALE STATE: NJ ZIP: 07645 10-Q 1 PERIOD ENDED 3/31/96 1 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 Quarter Ended March 31, 1996 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 0-6516 DATASCOPE CORP. (Exact name of registrant as specified in its charter) Delaware 13-2529596 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 14 Philips Parkway, Montvale, New Jersey 07645-9998 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 391-8100 - - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report: 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_______ Number of Shares of Company's Common Stock outstanding as of April 30, 1996: 16,131,242. 2 Datascope Corp. and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations Net Sales The consolidated sales increase in the third quarter and first nine months of fiscal 1996 as compared to the corresponding periods last year, was favorably impacted by a $2 million sales reserve established in the third quarter of fiscal 1995 in connection with the domestic recall of the Point of View(R) (POV) monitor. Excluding the effect of last year's sales reserve, third quarter and first nine months fiscal 1996 consolidated sales increased 4% and 7%, respectively, which is a lower rate of growth than the first and second quarters of fiscal 1996. Excluding the effect of the sales reserve taken last year, third quarter sales of the Patient Monitoring division declined in both domestic and international markets. The sales decline was caused by increased competition and by delays in bringing new products to market. The Company has engaged outside technical resources to augment its internal staff and, consequently, will incur increased research and development expenses in the near term. The Cardiac Assist division made the principal contribution to increased sales during the third quarter and first nine months of fiscal 1996. Sales of the division's products continued to increase, although the rate of growth slowed compared to recent quarters because of increased competition which the Company expects will continue in the near-term. Competitive pressures had a particularly strong impact on the Company's revenues from shipment of pumps, which increasingly are being sold under terms that result in delayed recognition of revenue from the shipment. The Company believes it retained its market share despite the intensified efforts of its competitors in this market. InterVascular, Inc., the Company's wholly owned producer of Vascular grafts with sales primarily in the international market, continued its strong growth rate. The Company continued to be encouraged by the U.S. market reception of the VasoSeal(R) vascular hemostasis device during the third quarter, which was the first full quarter of commercial sale in the U.S. The VasoSeal U.S. field sales and training organization was expanded during the third quarter to take advantage of the market opportunity and the Company anticipates continued future expansion as well. VasoSeal is the first device, and currently the only device of its kind, approved by the Food and Drug Administration and sold in the U.S. The Company believes that its investment in expanding its sales force will strengthen its competitive advantage and ultimate market position in the vascular sealing device market in the United States. 3 The weakening of the U.S. dollar compared to major European currencies favorably impacted sales by approximately $0.2 million and $1.3 million in the third quarter and first nine months of fiscal 1996, respectively, compared to the corresponding periods last year. Gross Profit (Net Sales Less Cost of Sales) The gross profit percentage improved to 65.1% and 65.5% for the third quarter and first nine months of fiscal 1996, respectively, compared to 64.5% and 64.8% for the corresponding periods last year because of a more favorable sales mix, partially offset by the unfavorable effect of lower average selling prices in the Patient Monitoring and Cardiac Assist divisions due to competitive pressure. Research and Development (R&D) R&D expenses, as a percentage of sales, amounted to 10.7% and 11.3% in the third quarter and first nine months of fiscal 1996, as compared to 10.0% and 10.1% for the third quarter and first nine months last year, respectively. Total R&D expenses increased 16% and 22% in the third quarter and first nine months of fiscal 1996, respectively, compared to the same periods last year as R&D activity in all businesses was higher. Selling, General & Administrative Expenses (SG&A) SG&A expenses, as a percentage of sales, were 41.9% and 43.1% in the third quarter and first nine months of fiscal 1996, respectively, compared to 42.7% and 43.6% for the corresponding periods last year. SG&A expenses increased $1.3 million or 6% in the third quarter and $4.5 million or 7% in the first nine months of fiscal 1996, compared to the corresponding periods last year. The increases were primarily attributable to sales and marketing expenses relating to higher sales volume and start-up costs associated with the VasoSeal market introduction including the buildup of the U.S. VasoSeal field sales and training organization. The weakening of the U.S. dollar compared to major European currencies increased SG&A expenses by approximately $120 thousand and $820 thousand in the third quarter and first nine months of fiscal 1996, respectively, compared to the corresponding periods last year. Income from Settlement of Litigation In the second quarter of fiscal 1996, the Company settled all litigation brought by its wholly owned subsidiaries, InterVascular, Inc. and InterVascular, SA (France), against several former employees and certain other defendants. Income from the settlement of litigation, net of related expenses, was $10.7 million, or $7.9 million after tax, equivalent to $0.47 per share. 4 Interest Income and Expense The higher interest income in the third quarter and first nine months of fiscal 1996 compared to the same periods last year was attributable to an increase in the investment portfolio and an increase in interest rates. Other Income and Expense The Company enters into foreign exchange forward contracts to hedge a major portion of its foreign currency exposures, primarily related to certain receivables denominated in foreign currencies. The hedging has reduced the Company's exposure to fluctuations in foreign currencies. The net foreign exchange transaction gain or loss is reported in other income and expense. Foreign exchange forward contracts outstanding at March 31, 1996 totaled $120 thousand, all of which were in European currencies, with maturities that do not exceed 12 months. Net Earnings Excluding the special charge of $730,000 due to the effect of the $2 million POV monitor sales reserve in the third quarter last year and the $7.9 million income from the settlement of litigation in the second quarter of fiscal 1996, net earnings in the third quarter and first nine months of fiscal 1996 exceeded the same periods last year by 4% and 8%, respectively, which is a lower rate of earnings growth than recent periods. The Company believes that because of the competitive pressures in its core business it is possible that near-term quarterly earnings comparisons to the same prior year periods may be unfavorable. For the long-term the Company remains confident in the future of its core business and believes that new products already launched, under development or awaiting regulatory approvals, show good prospects for growing existing businesses and may enable expansion into new markets. Liquidity and Capital Resources The Company maintained its strong financial position during the first nine months of fiscal 1996. Working capital was $131.6 million at March 31, 1996, compared to $110.7 million at June 30, 1995. The current ratio at March 31, 1996 was 4.7:1 compared to 4.3:1 at June 30, 1995, with the increase attributable to cash and short-term investments due to profitable operations while current liabilities remained relatively unchanged. Cash provided by operating activities was $23.8 million in the first nine months of fiscal 1996 compared to $25.4 million in the corresponding period last year. In the first nine months of fiscal 1996, cash provided by operating activities included litigation settlement income of $7.9 million, partially offset by an increase in inventory. In the first nine months of fiscal 1995, cash from operating activities was favorably impacted by strong collections of accounts receivable. 5 In the first nine months of fiscal 1996, cash was used to purchase $15.2 million of marketable securities and $9.1 million of plant and equipment which included sales demonstration units for new products. On May 3, 1996 the Company announced a stock repurchase program utilizing up to $20 million to buy back its common stock from time to time, subject to market conditions and other relevant factors affecting the Company. Management believes that the Company's financial resources are sufficient to meet its projected cash requirements including the expenditures expected under the stock repurchase program. The moderate rate of current U.S. inflation has not significantly affected the Company. This Management's discussion and analysis of results of operations and financial condition includes forward-looking statements that may or may not materialize. Additional information on factors that could potentially affect the Company's financial results may be found in the Company's filings with the Securities and Exchange Commission. 6 Datascope Corp. and Subsidiaries Consolidated Balance Sheets (Dollars in thousands) Mar 31, June 30, 1996 1995 ----------- --------- Assets (unaudited) (a) Current Assets: Cash and cash equivalents 3,431 3,096 Marketable securities 68,471 53,165 Accounts receivable, less allowance for doubtful accounts of $1,396 and $1,273 46,688 45,590 Inventories (Note 2) 42,416 36,499 Prepaid expenses and other current assets 6,614 5,880 -------- -------- Total Current Assets 167,620 144,230 Property, Plant and Equipment, net of accumulated depreciation of $36,655 and $32,681 45,015 44,278 Marketable Securities, non-current 9,256 9,354 Other Assets 9,355 9,001 -------- -------- 231,246 206,863 ======== ======== Liabilities and Stockholders' Equity Current Liabilities: Accounts payable 8,019 7,644 Accrued expenses 16,546 14,149 Accrued compensation 8,716 9,384 Taxes on income 2,703 2,309 -------- -------- Total Current Liabilities 35,984 33,486 Other Liabilities 10,707 10,058 Stockholders' Equity (Note 3) Preferred stock, par value $1.00 per share: Authorized 5,000,000 shares; Issued and outstanding, none -- -- Common stock, par value $.01 per share: Authorized, 45,000,000 shares; Issued and outstanding, 16,131,139 and 16,070,689 shares 161 161 Additional paid-in capital 42,517 41,837 Retained earnings 142,597 121,347 Cumulative translation adjustments (720) (26) -------- -------- 184,555 163,319 -------- -------- 231,246 206,863 ======== ======== (a) Derived from audited financial statements See notes to consolidated financial statements 7 Datascope Corp. and Subsidiaries Statements of Consolidated Earnings (In thousands, except per share amounts) (Unaudited)
Nine Months Ended Three Months Ended March 31, March 31, -------------------------- -------------------------- 1996 1995 1996 1995 --------- --------- --------- --------- Net Sales $ 152,800 $ 140,500 $ 54,600 $ 50,500 --------- --------- --------- --------- Costs and Expenses: Cost of sales 52,783 49,505 19,063 17,940 Research and development expenses 17,274 14,152 5,824 5,036 Selling, general and administrative expenses 65,797 61,302 22,859 21,579 Income from settlement of litigation (Note 4) (10,691) -- -- -- --------- --------- --------- --------- 125,163 124,959 47,746 44,555 --------- --------- --------- --------- Operating Earnings 27,637 15,541 6,854 5,945 Other (Income) Expense: Interest income (3,193) (1,859) (1,137) (727) Interest expense 44 18 6 11 Other, net 508 209 162 112 --------- --------- --------- --------- (2,641) (1,632) (969) (604) --------- --------- --------- --------- Earnings Before Taxes on Income 30,278 17,173 7,823 6,549 Taxes on Income 9,028 5,536 2,386 2,030 --------- --------- --------- --------- Net Earnings $ 21,250 $ 11,637 $ 5,437 $ 4,519 ========= ========= ========= ========= Earnings Per Share (Note 3) $ 1.28 $ 0.72 $ 0.33 $ 0.28 ========= ========= ========= ========= Weighted Average Number of Common and Common Equivalent Shares Outstanding (Note 3) 16,556 16,206 16,602 16,211 ========= ========= ========= =========
See notes to consolidated financial statements 8 Datascope Corp. and Subsidiaries Statements of Consolidated Cash Flows (Dollars in thousands) (Unaudited) Nine Months Ended March 31, ----------------------- 1996 1995 --------- --------- Operating Activities: Net cash provided by operating activities $ 23,842 $ 25,425 --------- --------- Investing Activities: Capital expenditures (9,058) (10,772) Purchases of short-term marketable securities (106,097) (57,077) Maturities of short-term marketable securities 90,889 52,055 Purchases of long-term marketable securities -- (9,509) --------- --------- Net cash used in investing activities (24,266) (25,303) --------- --------- Financing Activities: Net cash provided by financing activities 512 168 --------- --------- Effect of exchange rates on cash 247 (391) --------- --------- Increase (decrease) in cash and cash equivalents 335 (101) Cash and cash equivalents, beginning of period 3,096 2,082 --------- --------- Cash and cash equivalents, end of period $ 3,431 $ 1,981 ========= ========= Supplemental Cash Flow Information Cash paid during the period for: Income taxes $ 8,617 $ 4,480 --------- --------- See notes to consolidated financial statements 9 Datascope Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) 1. Basis of Presentation The consolidated balance sheet as of March 31, 1996 and the statements of consolidated earnings and cash flows for the three and nine month periods ended March 31, 1996 and 1995 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) have been made that are necessary to present fairly the financial position, results of operations and cash flows for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that the condensed consolidated financial statements included herein be read in conjunction with the financial statements and notes included in the Company's June 30, 1995 annual report to shareholders. The results of operations for the period ended March 31, 1996 are not necessarily indicative of a full year's operations. The presentation of certain prior year information has been reclassified to conform with the current year presentation. 2. Inventories Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or market. (In thousands) -------------------------- March 31, June 30, 1996 1995 ------- ------- Materials $18,455 $15,452 Work in Process 8,330 6,592 Finished Goods 15,631 14,455 ------- ------- $42,416 $36,499 ======= ======= 3. Stockholders' Equity Changes in the components of stockholders' equity for the nine months ended March 31, 1996 are as follows: (In thousands) -------------- Net income $21,250 Translation adjustments (694) Proceeds on the exercise of options to purchase 60,450 shares of common stock 680 ------- Total increase in stockholders' equity $21,236 ======= 4. Income from Settlement of Litigation In the second quarter of fiscal 1996 the Company settled all litigation brought by its wholly owned subsidiaries, InterVascular, Inc. and InterVascular, SA (France), against several former employees and certain other defendants. Income from the settlement of litigation, net of related expenses, was $10.7 million, or $7.9 million after tax, equivalent to $0.47 per share. 10 Part II: Item 1 Legal Proceedings On March 4, 1996 the Company announced that Quinton Instrument Company and Sherwood Medical Company had filed a complaint in the United States District Court for the Eastern District of Virginia alleging that the VasoSeal(R) vascular hemostasis device infringes on certain patents owned by Quinton. The complaint seeks a permanent injunction as well as an unspecified amount of monetary damages. The Company believes that the allegations in the complaint are without merit and will vigorously defend the action. Item 6 Exhibits and Reports on Form 8-K (b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. 11 Form 10-Q 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. DATASCOPE CORP. Registrant By: /s/ Lawrence Saper ------------------------- Lawrence Saper Chairman of the Board and Chief Executive Officer By: /s/ Murray Pitkowsky ------------------------- Murray Pitkowsky Senior Vice President and Secretary Dated: May 15, 1996 12 EXHIBIT INDEX Exhibit No. Description - - ---------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 Consolidated Balance Sheets and Statements of Consolidated Earnings. 1,000 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 3,431 68,471 48,084 (1,396) 42,416 167,620 81,670 (36,655) 231,246 35,984 0 0 0 161 184,394 231,246 152,800 152,800 52,783 52,783 0 0 44 30,278 9,028 21,250 0 0 0 21,250 1.28 1.28
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