-----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, Tk9yJE4i/AIeSvQ4Bpmnn9R93A7fdvwyfjZUSKKqhyJzx6WbuZB3rpYABOK3ac+N UtNg8NaxoWB3h3bD5920yA== 0000950123-97-004307.txt : 19970515 0000950123-97-004307.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950123-97-004307 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATASCOPE CORP CENTRAL INDEX KEY: 0000027096 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [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: 97605403 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 FIRST QUARTER 10-Q: DATASCOPE CORP. 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, 1997 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 30,1997: 16,235,992. 2 DATASCOPE CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS NET SALES Net sales increased 6% and 7% in the third quarter and first nine months of fiscal 1997, respectively, compared to the corresponding periods last year, despite lower sales in the Cardiac Assist division and InterVascular, Inc., because of the continued U.S. sales growth of VasoSeal(R) and increased sales in the patient monitoring business. Sales of cardiac assist products in the third quarter and first nine months declined due to continued competition that resulted in lower prices of intra-aortic balloon catheters and pumps, competitive offerings of balloon catheters for evaluation and more shipments of pumps under terms that result in future revenues. The company expects that the current competitive conditions will continue and intends to compete vigorously to defend its market share. Sales of InterVascular, Inc. in the third quarter and first nine months of fiscal 1997 were below last year primarily because of a 40% price reduction on vascular graft products imposed by the French government in November 1996 and the unfavorable effect of foreign exchange due to the stronger U.S. dollar. Although unit sales of grafts exceeded prior year, favorable year-to-year dollar sales comparisons are not anticipated until after the InterGard(TM) collagen-coated grafts receive marketing clearance in Japan and the U.S. Sales of patient monitoring products increased in the third quarter and first nine months of fiscal 1997 due to strong domestic sales growth attributable to increased sales of the new Passport(R) XG monitor introduced in June 1996. The company believes the Passport XG has a larger and brighter screen than any competitive portable monitor and the introduction of the Passport XG-CD monitor with a color display screen in the third quarter is expected to further strengthen the company's market position. International sales of patient monitors grew in the third quarter, the first year-to-year quarterly sales increase since the fourth quarter of 1996, attributable to increased sales of Passports and of Accutorr Plus monitors which were introduced in international markets in the first quarter. Sales of VasoSeal in the U.S. exceeded an annualized rate of $19 million, a 42% increase over the second quarter of fiscal 1997. The company continued to add a substantial number of new hospital accounts and repeat orders continued to grow. The continued strong sales performance of VasoSeal reflects excellent acceptance by doctors in the interventional cardiology market and initial introduction in the 3 interventional radiology market. The company received Food and Drug Administration (FDA) approval to market VasoSeal for sealing vascular punctures following interventional radiology procedures during the second quarter of fiscal 1997. On April 30, 1997, the company announced that it had received FDA approval to market VasoSeal for use following stent implantation. Stents, which are devices that support the arterial wall, are implanted in conjunction with approximately 40% of the 500,000 coronary angioplasty procedures performed annually in the U.S. The foreign exchange rate effect of the stronger U.S. dollar compared to major European currencies decreased total sales by approximately $460 thousand and $1.0 million in the third quarter and first nine months of fiscal 1997, respectively, compared to the same periods last year. GROSS PROFIT (NET SALES LESS COST OF SALES) The gross profit percentage was 64.6% and 65.0% for the third quarter and first nine months of fiscal 1997, respectively, compared to 65.1% and 65.5% for the corresponding periods last year, with the reduction primarily attributable to lower average selling prices for cardiac assist and vascular graft products. RESEARCH AND DEVELOPMENT (R&D) R&D expenses, as a percentage of sales, amounted to 10.7% and 12.3% in the third quarter and first nine months of fiscal 1997, respectively, as compared to 10.7% and 11.3% for the same periods last year. Total R&D expenses increased $0.4 million or 6% and $2.8 million or 16% in the third quarter and first nine months of fiscal 1997, respectively, compared to the same periods last year due to increased new product development in all businesses. SELLING, GENERAL & ADMINISTRATIVE EXPENSES (SG&A) SG&A expenses, as a percentage of sales, were 41.7% and 43.5% in the third quarter and first nine months of fiscal 1997, respectively, compared to 41.9% and 43.1% for the corresponding periods last year. SG&A expenses increased $1.3 million or 6% in the third quarter and $5.2 million or 8% in the first nine months of fiscal 1997, compared to the corresponding periods last year. The increases were primarily attributable to the expansion of the U.S. VasoSeal field sales and training organization, higher selling expenses in the Patient Monitoring division and increased corporate expenses related to the addition of a Business Development department. The stronger U.S. dollar compared to major European currencies decreased SG&A expenses by approximately $290 thousand and $637 thousand in the third quarter and first nine months of fiscal 1997, respectively, compared to the corresponding periods last year. 4 SETTLEMENTS OF LITIGATION Included in net earnings in the first nine months of fiscal 1997 was the settlement expense for two lawsuits recorded in the first quarter: 1) The shareholder class action securities lawsuit was filed against the company in November 1993. The cost of the settlement including legal fees was $5.6 million, $3.3 million after-tax or $0.20 per share. 2) The patent infringement lawsuit was filed in February 1996 by Quinton Instruments Company and Sherwood Medical Company concerning the VasoSeal Vascular Hemostasis Device. The settlement of this lawsuit allows all parties to market their respective vascular hemostasis products and includes covenants against future litigation. The cost of the settlement including legal fees was $3.0 million, $1.8 million after-tax or $0.11 per share. Included in net earnings in the first nine months of fiscal 1996 was income from litigation settlement against several former employees of InterVascular, Inc. of $10.7 million, $7.9 million after-tax, or $0.47 per share. INTEREST INCOME AND EXPENSE Interest income in the third quarter of 1997 was the same as the third quarter last year as the average investment portfolio and average yields were essentially unchanged. However, interest income in the first nine months of fiscal 1997 was higher compared to the same period last year primarily attributable to an increase in the investment portfolio, due to cash generated from operations including cash from the settlement of InterVascular litigation received in December 1995 which was invested in marketable securities. 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, 1997 totaled $448 thousand, all of which were in European currencies, with maturities that do not exceed 12 months. NET EARNINGS Net earnings in the third quarter of fiscal 1997 improved to $5.7 million or $0.35 per share compared to $5.4 million, or $0.33 per share for the comparable quarter last year. The higher earnings resulted primarily from the improved performance of VasoSeal and the Patient Monitoring division, and to a lower income tax rate, which offset lower results in the Cardiac Assist division and InterVascular, Inc. Excluding litigation settlement expense or income, net earnings for the first nine months of fiscal 1997 were $12.6 million or $0.77 per share compared to $13.4 million or $0.81 per share for the first nine months 5 last year. Litigation settlement expense amounted to $8.6 million, $5.1 million after-tax, or $0.31 per share in fiscal 1997 and litigation settlement income amounted to $10.7 million, $7.9 million after-tax, or $0.47 per share in fiscal 1996. The decline in earnings occurred in the first quarter as a result of higher R&D expense, lower earnings in the Cardiac Assist division and expenses related to the expansion of the VasoSeal direct marketing organization. LIQUIDITY AND CAPITAL RESOURCES The company maintained its strong financial position during the first nine months of fiscal 1997. Working capital was $122.9 million at March 31, 1997, compared to $121.4 million at June 30, 1996 and the current ratio at March 31, 1997 was 4.2:1 compared to 3.9:1 at June 30, 1996. Cash provided by operating activities of $2.9 million in the first nine months of fiscal 1997 compares to $19.1 million in the corresponding period last year. The decrease was primarily due to the receipt of litigation settlement income of $7.9 million last year, compared to litigation settlement disbursements of $5.1 million in the first nine months of fiscal 1997. In the first nine months of fiscal 1997, cash was used to purchase $3.8 million of capital equipment compared to $4.4 million in the same period last year. On May 3, 1996 the company announced a stock repurchase program permitting the utilization of 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. During the first nine months of fiscal 1997, 102,300 shares of the company's stock were repurchased at a cost of $1,992,000. Since inception of the stock repurchase program, the company repurchased 196,300 shares of stock at a cost of $3,663,000. 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. INFORMATION CONCERNING FORWARD LOOKING STATEMENTS This management's discussion and analysis of results of operations and financial condition includes forward-looking statements that are subject to uncertainty because of the possibility that market conditions may change, particularly as a result of the introduction of new cardiac assist products by competitors and because the timing of regulatory approvals is uncertain. Furthermore, there can be no assurance that recent sales and earnings growth trends will continue. Additional detailed 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, 1997 1996 --------- --------- ASSETS (unaudited) (a) Current Assets: Cash and cash equivalents $ 3,043 $ 2,574 Short-term investments 59,689 64,805 Accounts receivable, less allowance for doubtful accounts of $1,083 and $1,198 47,804 50,559 Inventories (Note 2) 41,037 34,757 Prepaid expenses and other current assets 10,239 10,743 --------- --------- Total Current Assets 161,812 163,438 Property, Plant and Equipment, net of accumulated depreciation of $40,662 and $36,363 44,848 43,973 Non-Current Marketable Securities 20,008 17,364 Other Assets 10,320 9,689 --------- --------- $ 236,988 $ 234,464 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 7,375 $ 6,664 Accrued expenses 20,978 23,372 Accrued compensation 8,034 9,946 Taxes on income 2,502 2,097 --------- --------- Total Current Liabilities 38,889 42,079 Other Liabilities 11,248 10,705 Stockholders' Equity (Note 3) Preferred stock, par value $1.00 per share: Authorized 5,000,000 shares; Issued, none -- -- Common stock, par value $.01 per share: Authorized, 45,000,000 shares; Issued and outstanding, 16,235,836 and 16,135,427 shares 162 161 Additional paid-in capital 43,995 42,548 Treasury stock at cost, 196,300 and 94,000 shares (3,663) (1,671) Retained earnings 149,267 141,764 Cumulative translation adjustments (2,910) (1,122) --------- --------- 186,851 181,680 --------- --------- $ 236,988 $ 234,464 ========= =========
(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, --------------------------- ------------------------- 1997 1996 1997 1996 --------- --------- -------- -------- NET SALES $ 163,100 $ 152,800 $ 57,900 $ 54,600 --------- --------- -------- -------- Costs and Expenses: Cost of sales 57,118 52,783 20,502 19,063 Research and development expenses 20,119 17,274 6,180 5,824 Selling, general and administrative expenses 71,017 65,797 24,139 22,859 Settlements of litigation (Note 4) 8,554 (10,691) -- -- --------- --------- -------- -------- 156,808 125,163 50,821 47,746 --------- --------- -------- -------- OPERATING EARNINGS 6,292 27,637 7,079 6,854 Other (Income) Expense: Interest income (3,568) (3,193) (1,119) (1,137) Interest expense 14 44 6 6 Other, net 488 508 209 162 --------- --------- -------- -------- (3,066) (2,641) (904) (969) --------- --------- -------- -------- EARNINGS BEFORE TAXES ON INCOME 9,358 30,278 7,983 7,823 Taxes on Income 1,855 9,028 2,233 2,386 --------- --------- -------- -------- NET EARNINGS $ 7,503 $ 21,250 $ 5,750 $ 5,437 ========= ========= ======== ======== Earnings Per Share (Note 3) $ 0.46 $ 1.28 $ 0.35 $ 0.33 ========= ========= ======== ======== Weighted Average Number of Common and Common Equivalent Shares Outstanding (Note 3) 16,349 16,556 16,544 16,602 ========= ========= ======== ========
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, -------------------------- 1997 1996 -------- --------- OPERATING ACTIVITIES: Net cash provided by operating activities $ 2,854 $ 19,145 -------- --------- INVESTING ACTIVITIES: Capital expenditures (3,783) (4,361) Purchases of marketable securities (71,234) (106,097) Maturities of marketable securities 73,706 90,889 -------- --------- Net cash used in investing activities (1,311) (19,569) -------- --------- FINANCING ACTIVITIES: Net cash (used in) provided by financing activities (544) 512 -------- --------- Effect of exchange rates on cash (530) 247 -------- --------- Increase in cash and cash equivalents 469 335 Cash and cash equivalents, beginning of period 2,574 3,096 -------- --------- Cash and cash equivalents, end of period $ 3,043 $ 3,431 ======== ========= SUPPLEMENTAL CASH FLOW INFORMATION Cash (refunded) paid during the period for: Income taxes $ (21) $ 8,617 -------- --------- Non-cash transactions: Net transfers of inventory to fixed assets for use as demonstration equipment $ 4,534 $ 2,925 -------- ---------
See notes to consolidated financial statements 9 DATASCOPE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The consolidated balance sheets as of March 31, 1997 and 1996, the statements of consolidated earnings for the three and nine month periods ended March 31, 1997 and 1996 and the statements of consolidated cash flows for the nine month periods ending March 31, 1997 and 1996 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, 1996 annual report to shareholders. The results of operations for the period ended March 31, 1997 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) ------------------------- Mar 31, June 30, 1997 1996 ------- ------- Materials $15,251 $15,711 Work in Process 5,853 7,064 Finished Goods 19,933 11,982 ------- ------- $41,037 $34,757 ======= =======
3. STOCKHOLDERS' EQUITY Changes in the components of stockholders' equity for the nine months ended March 31, 1997 are as follows:
(In thousands) -------------- Net income $ 7,503 Translation adjustments (1,788) Purchase of treasury stock (1,992) Common stock and additional paid-in capital effects of stock option activity 1,448 ======= Total increase in stockholders' equity $ 5,171 =======
10 DATASCOPE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. SETTLEMENTS OF LITIGATION The Company settled litigation during the first quarter of fiscal 1997 resulting in the following charges against earnings : $5.6 million before taxes, $3.3 million after income tax, equivalent to $0.20 per share to settle the shareholder class action securities lawsuit, including related legal fees. $3.0 million before taxes, $1.8 million after income tax, equivalent to $0.11 per share to settle the patent infringement lawsuit filed by Quinton Instruments Company and Sherwood Medical Company concerning the VasoSeal Vascular Hemostasis Device, including related legal fees. The settlement allows all parties to market their respective vascular hemostasis products and includes covenants against future 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 before taxes, $7.9 million after income tax, equivalent to $0.47 per share. 11 Part II: Item 2 Issuance of Unregistered Securities During the third quarter of fiscal 1997 the company granted 56,000 shares of stock options at exercise prices ranging from $22.50 to $22.625 per share. 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. 12 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 14, 1997 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED EARNINGS. 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 3,043 59,689 48,887 (1,083) 41,037 161,812 85,510 (40,662) 236,988 38,889 0 0 0 162 186,689 236,988 163,100 163,100 57,118 57,118 0 0 14 9,358 1,855 7,503 0 0 0 7,503 0.46 0.46
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