-----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, S3bZBTAumjbzwWyhhzHBFxbetYR79OokxLhtV1WyfqQbR8XaJNY3t/tA13E4HVTu mXoNpYQiAbDrR3S2Udd+TQ== 0000950123-96-006597.txt : 19961118 0000950123-96-006597.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950123-96-006597 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96663993 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 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 September 30, 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 October 31, 1996: 16,138,248. 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 4% in the first quarter of fiscal 1997 compared to the first quarter last year as a result of the continued U.S. sales growth of VasoSeal(R), which was introduced to the U.S. market in the second quarter last year, and increased sales in the domestic patient monitoring business that more than offset a sales decline in cardiac assist products and vascular grafts. The decline in sales of cardiac assist products was attributable to the continuation of competitive offerings of intra-aortic balloon catheters for evaluation, lower balloon and pump prices and more balloon pump shipments under terms that result in future revenues. The company expects this competitive environment to continue and it intends to compete vigorously to retain its market leadership in intra-aortic balloon pumping. Sales of patient monitoring products increased in the first quarter of fiscal 1997 due to strong domestic sales growth, particularly sales of the new Passport(R) XG monitor introduced in June 1996. The company plans to further enhance the Passport monitor line by introducing additional features, including a color screen, during the second quarter of fiscal 1997. Sales growth of InterVascular, Inc., the company's subsidiary which produces vascular grafts, was interrupted in the first quarter due to reduced shipments to its distributor in Japan. The distributor is reducing inventory of non-coated grafts in anticipation of obtaining regulatory approval of the company's InterGard(TM) collagen-coated grafts. InterVascular continued to expand in the European market and overall sales growth is expected to resume in the second quarter. Despite the seasonal slowness of the first quarter, sales of VasoSeal in the U.S. exceeded an annualized rate of $9 million, a 10% increase over the fourth quarter of fiscal 1996. The company is continuing to expand its direct marketing organization to capitalize on VasoSeal's market potential. As announced in August 1996, the U.S. Food and Drug Administration has approved revised VasoSeal labeling that includes the claim that patients who receive VasoSeal can be ambulated significantly earlier than under conventional clinical practice using manual or mechanical compression. Early ambulation made possible by VasoSeal should result in significant cost savings for hospitals because hospitalization time is reduced, patients may be moved earlier to care settings that cost less, human and material resources are reduced and patient throughput is increased. VasoSeal is the only 2 3 vascular sealing device approved in the U.S. to claim early ambulation. Early ambulation and the potential to lower hospital costs should accelerate VasoSeal's penetration of the vascular sealing market 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 $300 thousand in the first quarter of fiscal 1997 compared to the same period last year. GROSS PROFIT (NET SALES LESS COST OF SALES) The gross profit percentage was 65.0% for the first quarter of fiscal 1997 compared to 65.4% for the corresponding period last year, with the slight reduction primarily attributable to lower average selling prices for cardiac assist and patient monitoring products. RESEARCH AND DEVELOPMENT (R&D) R&D expenses, as a percentage of sales, amounted to 15.0% in the first quarter of fiscal 1997 compared to 12.2% for the first quarter last year. Total R&D expenses increased $1.5 million or 27% in the first quarter of fiscal 1997 compared to the same period last year attributable to new product development activity in all businesses. Increased Cardiac Assist R&D expense is directed towards new intra-aortic balloon pump and balloon catheter products. Higher R&D expense in the Patient Monitoring division was primarily attributable to development of enhanced versions of the Accutorr and Passport monitors and expenditures for outside technical resources to augment the internal R&D staff. InterVascular R&D expenses increased primarily as a result of increased technical staff and higher validation and regulatory expenses. SELLING, GENERAL & ADMINISTRATIVE EXPENSES (SG&A) SG&A expenses, as a percentage of sales, were 46.8% in the first quarter of fiscal 1997 compared to 45.1% for the corresponding period last year. SG&A expenses increased $1.6 million or 8% in the first quarter of fiscal 1997 compared to the corresponding period last year, with the increase primarily attributable to the expansion of the U.S. VasoSeal field sales and training organization and higher selling expenses applicable to all other businesses. The stronger U.S. dollar compared to major European currencies decreased SG&A expenses by approximately $200 thousand in the first quarter of fiscal 1997 compared to the corresponding period last year. 3 4 SETTLEMENTS OF LITIGATION Included in net earnings in the first quarter of fiscal 1997 was the settlement expense for two lawsuits: 1) The patent infringement lawsuit 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 is $3.0 million, $1.8 million after-tax or $0.11 per share. 2) The shareholder class action securities lawsuit filed in November 1993 against the company. The cost of the settlement including legal fees is $5.6 million, $3.3 million after-tax or $0.20 per share. This settlement is subject to final documentation and court approval. INTEREST INCOME AND EXPENSE The higher interest income in the first quarter of fiscal 1997 compared to the same period last year was attributable to an increase in the investment portfolio as cash generated from operations 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 September 30, 1996 totaled $700 thousand, all of which were in European currencies, with maturities that do not exceed 12 months. NET EARNINGS Excluding the special charge for settlement of litigation of $8.6 million, $5.1 million after-tax or $0.31 per share in the first quarter of fiscal 1997, net earnings in the first quarter of fiscal 1997 were $1.8 million or $0.11 per share compared to $3.1 million or $0.19 per share for the first quarter last year. The lower earnings resulted primarily from higher R&D expenses and the effect of competitive pressure on the Cardiac Assist division. Although the company expects to experience continued competitive pressures on its cardiac assist business and continued higher level of R&D investments, comparisons with prior year results should progressively improve throughout the balance of fiscal 1997. 4 5 LIQUIDITY AND CAPITAL RESOURCES The company maintained its strong financial position during the first quarter of fiscal 1997. Working capital was $112.4 million at September 30, 1996 compared to $121.4 million at June 30, 1996 with the decrease attributable to investing cash in long term marketable securities and an increase in accrued expenses related to the settlements of litigation. As a result, the current ratio at September 30, 1996 was 3.4:1 compared to 3.9:1 at June 30, 1996. Cash provided by operating activities was $8.0 million in the first quarter of fiscal 1997 compared to $6.7 million in the corresponding period last year. In the first quarter of fiscal 1997, cash was used to purchase $5.7 million of marketable securities and $1.0 million of plant and equipment. 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 quarter of fiscal 1997 there were no repurchases of company stock. 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 are subject to uncertainty. Reasons for the uncertainty include the possibility that market conditions affecting the competitive environment for cardiac assist products may change as a result of the introduction of new products by competitors, and the probability that the French government will impose price controls on vascular grafts. 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. 5 6 DATASCOPE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
SEPT 30, JUNE 30, 1996 1996 --------- --------- (unaudited) (a) ASSETS Current Assets: Cash and cash equivalents $ 3,782 $ 2,574 Short-term investments 66,155 64,805 Accounts receivable, less allowance for doubtful accounts of $947 and $1,198 41,979 50,559 Inventories (Note 2) 37,711 34,757 Prepaid expenses and other current assets 10,138 10,743 --------- --------- Total Current Assets 159,765 163,438 Property, Plant and Equipment, net of accumulated depreciation of $37,427 and $36,363 44,457 43,973 Non-Current Marketable Securities 21,756 17,364 Other Assets 10,614 9,689 --------- --------- $ 236,592 $ 234,464 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 6,597 $ 6,664 Accrued expenses 31,650 23,372 Accrued compensation 9,079 9,946 Taxes on income -- 2,097 --------- --------- Total Current Liabilities 47,326 42,079 Other Liabilities 10,925 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, 16,135,158 and 16,135,427 shares 161 161 Additional paid-in capital 42,543 42,548 Treasury stock at cost, 94,000 shares (1,671) (1,671) Retained earnings 138,466 141,764 Cumulative translation adjustments (1,158) (1,122) --------- --------- 178,341 181,680 --------- --------- $ 236,592 $ 234,464 ========= =========
(a) Derived from audited financial statements See notes to consolidated financial statements 6 7 DATASCOPE CORP. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, --------------------------- 1996 1995 -------- -------- NET SALES $ 47,600 $ 45,900 -------- -------- Costs and Expenses: Cost of sales 16,649 15,861 Research and development expenses 7,131 5,611 Selling, general and administrative expenses 22,258 20,694 Settlements of litigation (Note 4) 8,554 -- -------- -------- 54,592 42,166 -------- -------- OPERATING EARNINGS (6,992) 3,734 Other (Income) Expense: Interest income (1,189) (1,015) Interest expense 4 18 Other, net 138 135 -------- -------- (1,047) (862) -------- -------- EARNINGS BEFORE TAXES ON INCOME (5,945) 4,596 Taxes on Income (2,647) 1,494 -------- -------- NET EARNINGS $ (3,298) $ 3,102 ======== ======== Earnings Per Share (Note 3) $ (0.20) $ 0.19 ======== ======== Weighted Average Number of Common and Common Equivalent Shares Outstanding (Note 3) 16,237 16,428 ======== ========
See notes to consolidated financial statements 7 8 DATASCOPE CORP. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (DOLLARS IN THOUSANDS) (Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, ------------------------- 1996 1995 -------- -------- OPERATING ACTIVITIES: Net cash provided by operating activities $ 8,010 $ 6,688 -------- -------- INVESTING ACTIVITIES: Capital expenditures (1,015) (2,029) Purchases of short-term marketable securities (20,975) (27,872) Maturities of short-term marketable securities 19,625 21,954 Purchases of long-term marketable securities (4,392) -- -------- -------- Net cash used in investing activities (6,757) (7,947) -------- -------- FINANCING ACTIVITIES: Net cash (used in) provided by financing activities (5) 227 -------- -------- Effect of exchange rates on cash (40) 150 -------- -------- Increase (decrease) in cash and cash equivalents 1,208 (882) Cash and cash equivalents, beginning of period 2,574 3,096 -------- -------- Cash and cash equivalents, end of period $ 3,782 $ 2,214 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION Cash (refunded) paid during the period for: Income taxes $ (1,154) $ 708 -------- -------- Non-cash transactions: Net transfers of inventory to fixed assets for use as demonstration equipment $ 1,573 $ 631 -------- --------
See notes to consolidated financial statements 8 9 DATASCOPE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The consolidated balance sheet as of September 30, 1996 and the statements of consolidated earnings and cash flows for the three month periods ended September 30, 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, 1996 annual report to shareholders. The results of operations for the period ended September 30, 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) --------------------------- Sept 30, June 30, 1996 1996 -------- -------- Materials $16,150 $15,711 Work in Process 6,902 7,064 Finished Goods 14,659 11,982 ------- ------- $37,711 $34,757 ======= =======
3. STOCKHOLDERS' EQUITY Changes in the components of stockholders' equity for the three months ended September 30, 1996 are as follows:
(In thousands) -------------- Net income (loss) $(3,298) Translation adjustments (36) Common stock and additional paid-in capital effects of stock option activity (5) ------- Total decrease in stockholders' equity $(3,339) =======
4. SETTLEMENTS OF LITIGATION The Company settled litigation during the first quarter of fiscal 1997 resulting in the following charges against first quarter earnings: $5,550,000 before taxes, $3,291,000 after income tax, equivalent to $0.20 per share to settle the shareholder class action securities lawsuit, including related legal fees. $3,004,000 before taxes, $1,807,000 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. 9 10 Part II: 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. 10 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: LAWRENCE SAPER -------------------------- Lawrence Saper Chairman of the Board and Chief Executive Officer By: MURRAY PITKOWSKY -------------------------- Murray Pitkowsky Senior Vice President and Secretary Dated: November 13, 1996 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED EARNINGS. 3-MOS JUN-30-1997 JUL-01-1996 SEP-30-1996 3,782 66,155 42,926 (947) 37,711 159,765 81,884 (37,427) 236,592 47,326 0 0 0 161 178,180 236,592 47,600 47,600 16,649 16,649 0 0 4 (5,945) (2,647) (3,298) 0 0 0 (3,298) (0.20) (0.20)
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