-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, KEeG1N9V9razZd9C8bj+ZyPmljxv06Y2Q66a8uBpqwLlRma9ppwUHTqrFkOnA0SW 1ds4NAJnNpY0s9OkLy1rPg== 0000203077-95-000004.txt : 19950516 0000203077-95-000004.hdr.sgml : 19950516 ACCESSION NUMBER: 0000203077-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ST JUDE MEDICAL INC CENTRAL INDEX KEY: 0000203077 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 411276891 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08672 FILM NUMBER: 95539353 BUSINESS ADDRESS: STREET 1: ONE LILLEHEI PLAZA CITY: ST PAUL STATE: MN ZIP: 55117 BUSINESS PHONE: 6124832000 MAIL ADDRESS: STREET 1: ONE LILLEHEI PLAZA CITY: ST PAUL STATE: MN ZIP: 55117 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1995 Commission File Number 0-8672 ST. JUDE MEDICAL, INC. (Exact name of registrant as specified in its charter) MINNESOTA 41-1276891 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) One Lillehei Plaza, St. Paul, Minnesota 55117 (Address of principal executive offices) (612) 483-2000 (Registrant's telephone number, including area code) Not Applicable (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, and (2) has been subject to such filing requirements for the past 90 days. YES ___ NO _X_ The number of shares of common stock, par value $.10 per share, outstanding at April 28, 1995 was 46,527,329. This Form 10-Q consists of 10 pages consecutively numbered. The Exhibit Index to this Form 10-Q is set forth on page 10. PART I FINANCIAL INFORMATION ST. JUDE MEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1995 are not necessarily indicative of the results that may be expected for the full year ended December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. NOTE 2 - ACQUISITIONS Effective September 30, 1994, the Company acquired from Siemens AG substantially all of its worldwide cardiac rhythm management operations ("Pacesetter") for a price not to exceed $531.3 million. The initial purchase price of $511.3 million can be adjusted upward by a maximum of $20 million or downward based upon the change in the net asset value of Pacesetter from September 30, 1993, to September 30, 1994. The Company and Siemens AG currently disagree about the final adjustment to the purchase price and are following the procedures in the purchase agreements to resolve their differences. The following unaudited pro forma summary information presents the results of operations of the Company and Pacesetter for the three months ended March 31, 1994, as if the acquisition had occurred at the beginning of 1993, after giving effect to certain adjustments including amortization of goodwill, increased interest expense, decreased interest income and the related income tax effects. Three Months Ending March 31, 1994 (Unaudited) Net sales $166.2 million Net income $ 27.6 million Earnings per share $ .59 These pro forma results are not necessarily indicative of the results that would have occurred had the acquisition actually taken place at the beginning of 1993, or of the expected future results of operations. PART I FINANCIAL INFORMATION ST. JUDE MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share amounts) (Unaudited) THREE MONTHS ENDED MARCH 31 1995 1994 Net sales $ 180,499 $66,685 Cost of sales 59,106 16,871 Gross profit 121,393 49,814 Operating expenses: Selling, general & administrative 58,251 13,785 Research & development 16,028 2,690 Total operating expenses 74,279 16,475 Operating profit 47,114 33,339 Other income(expense) (2,789) 3,776 Income before taxes 44,325 37,115 Income tax provision 13,741 10,578 Net income $ 30,584 $26,537 Earnings per share: Primary $ 0.65 $ 0.57 Fully diluted $ 0.65 $ 0.57 Dividends paid per share $ 0.00 $ 0.10 Shares outstanding Primary 46,998 46,649 Fully diluted 47,143 46,649 See notes to condensed consolidated financial statements. ST. JUDE MEDICAL, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) MARCH 31 DECEMBER 31 1995 1994 ASSETS (UNAUDITED) (SEE NOTE) Current assets: Cash and cash equivalents $ 16,937 $ 11,791 Marketable securities 124,489 125,177 Accounts receivable, less allowance (1995 - $6,319; 1994 - $5,760) 156,971 146,062 Inventories Finished goods 65,805 59,534 Work in process 23,329 21,723 Raw materials 45,017 48,750 Total inventories 134,151 130,007 Other current assets 27,566 21,045 Total current assets 460,114 434,082 Property, plant and equipment 163,903 157,017 Less accumulated depreciation (30,422) (24,852) Net property, plant and equipment 133,481 132,165 Other assets 351,470 353,651 TOTAL ASSETS $ 945,065 $ 919,898 LIABILITIES & SHAREHOLDERS' EQUITY Accounts payable and accrued expenses $ 129,228 $ 112,680 Long-term debt 225,000 255,000 Shareholders' equity: Preferred stock, par value $1.00 per share - 25,000,000 shares authorized; no shares issued -- -- Common stock, par value $.10 per share - 100,000,000 shares authorized; issued and outstanding 1995 - 46,527,225 shares; 1994 - 46,479,082 4,653 4,648 Additional paid-in capital 29,840 28,271 Retained earnings 551,681 521,097 Cumulative translation adjustment 4,404 (2,484) Unrealized gain on available-for-sale securities 259 686 Total shareholders' equity 590,837 552,218 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 945,065 $ 919,898 NOTE: The balance sheet at December 31, 1994 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. ST. JUDE MEDICAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) THREE MONTHS ENDED MARCH 31 1995 1994 Operating Activities: Net income $ 30,584 $ 26,537 Depreciation and amortization 9,735 2,304 Working capital change 717 2,108 Net cash provided by operating activities 41,036 30,949 Investing Activities: Purchases of property, plant and equipment (5,559) (2,855) Sales of available-for-sale securities, net 261 27,931 Other investing activities (2,817) (60) Net cash provided by (used in) investing activities (8,115) 25,016 Financing Activities: Proceeds from exercise of stock options 1,574 149 Cash dividends paid -- (4,641) Reduction of long-term debt (30,000) -- Net cash used in financing activities (28,426) (4,492) Effect of currency exchange rate changes on cash 651 193 Increase in cash and cash equivalents 5,146 51,666 Cash and cash equivalents at beginning of year 11,791 26,987 Cash and cash equivalents at end of period $ 16,937 $ 78,653 ST. JUDE MEDICAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Dollars in thousands, except per share amounts) RESULTS OF OPERATIONS: INTRODUCTION: Effective September 30, 1994, St. Jude Medical Inc. acquired from Siemens AG substantially all the worldwide assets of its cardiac rhythm management operations ("Pacesetter"). The acquisition significantly expanded the Company's product offerings. Results between 1995 and 1994 are not directly comparable because the Company's first quarter 1995 financial results include Pacesetter's operations. NET SALES. Net sales for the first quarter 1995 totalled $180,499, including approximately $112,000 from Pacesetter operations. This was a $113,814, or 171%, increase over net sales in the 1994 first quarter. Approximately 58% of the first quarter 1995 net sales were realized in the domestic market which is comparable to the first quarter 1994. On a comparable business basis, first quarter net sales in 1995 as compared to the first quarter of 1994 increased by approximately $1,700, or about 3%. This increase was attributable to higher mechanical heart valve net sales; particularly in emerging markets. In addition, tissue heart valve and cardiac assist device net sales increased over 1994 levels. Also, a favorable foreign currency translation effect due to the weaker U.S. dollar added approximately $1,700 to net sales in 1995. Pacesetter net sales increased approximately 13% over the proforma 1994 first quarter net sales. The increase principally resulted from strong domestic performance and was positively impacted by new product introductions, competitor quality problems and a continuing shift toward higher price superior performance products. GROSS PROFIT. The consolidated gross profit margin decreased in 1995 to 67.3% from the 74.7% recorded in the first quarter 1994. The decrease was mainly due to the fact that Pacesetter product margins are lower than the margins generated by the Company's heart valve operations. In addition, acquired Pacesetter fixed assets were recorded at fair market value resulting in higher depreciation charges. Higher mechanical heart valve component costs and sales into lower margin emerging markets together with the commencement of depreciation associated with the new heart valve component manufacturing plant also decreased the gross profit margin. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative (SG&A) expenses increased in the first quarter 1995 to $58,251 from $13,785 in the comparable period of 1994. As a percentage of net sales, first quarter SG&A increased to 32.3% in 1995 from 20.7% in 1994. Pacesetter related goodwill has been included in 1995 SG&A. As a percentage of sales, Pacesetter SG&A was higher than heart valve operations because Pacesetter uses a commission based third party distributor sales force in the U.S. and all international markets except Western Europe. The Company also established additional Western European distribution infrastructure as a result of the Pacesetter acquisition which has increased SG&A expenses. RESEARCH AND DEVELOPMENT. Research and development (R&D) expenses totalled $16,028 in the first quarter of 1995, which was $13,338 higher than the first quarter 1994 level. As a percentage of net sales, first quarter R&D expense increased in 1995 to 8.9% from 4.0% in 1994. The higher spending level primarily reflects the Pacesetter R&D and increased investments in mechanical and tissue valve projects. OTHER INCOME(EXPENSE). The $524,300 Pacesetter acquisition was funded by debt and internal funds. Consequently, interest income significantly decreased and the Company now has significant interest expense. Interest expense was approximately $4,000 in the first quarter 1995. Interest income totalled about $1,600 in 1995 as compared to nearly $3,600 in 1994. INCOME TAX PROVISION. The Company's effective income tax rate was 31% in the first quarter 1995, a 2.5 percentage point increase over the 28.5% effective tax rate in the first quarter 1994. The higher effective tax rate was due to reduced tax exempt interest income as a result of the Pacesetter acquisition, lower tax benefits derived from the Company's Puerto Rican operations as a result of Internal Revenue Code (IRC) changes passed in 1993 and generally higher taxed Pacesetter income. OUTLOOK. The Company expects further consolidation within the worldwide health care industry, advances in medical technology necessitating larger R&D expenditures and continued emphasis on cost effective clinical outcomes. Competitive pressures, hospital and other provider consolidations and various health care reform agendas may negatively impact product sales and restrict pricing flexibility. An Internal Revenue Service proposed change to IRC Section 936 regulations pertaining to the computation of Puerto Rican profits would, if finalized in its current form, reduce the tax benefits the Company derives from its Puerto Rican operations. The Company cannot predict when or if the proposed change will become final. No provision has been made for this proposed change to IRC Section 936. The Company continues to seek further diversification opportunities in the form of acquisitions, joint ventures, partnerships and investments in emerging technology companies as well as through internal R&D. The size, timing and financial impact of such efforts cannot be predicted. FINANCIAL CONDITION: The financial condition of the Company at March 31, 1995, continues to remain strong. Long-term debt was reduced to $225,000, a $30,000 decrease during the quarter. The ratio of current assets to current liabilities was 3.6 to 1 at March 31, 1995. Total assets increased $25,167 during the first quarter of 1995. Cash and marketable securities increased $4,458 primarily as a result of cash flow from operations after debt repayment. Accounts receivable increased $10,909 in conjunction with a significant increase in the first quarter net sales as compared to the net sales in the fourth quarter. Inventories increased $4,144 during the quarter primarily as a result of new product offerings. The $16,548 increase in current liabilities principally reflects higher accrued income taxes most of which will be paid during the second quarter 1995. Shareholders' equity increased $38,619 during the quarter to $590,837. The increase resulted from net income of $30,584, a foreign currency translation adjustment of $6,888 and $1,574 associated with the exercise of stock options and the issuance of restricted shares less an unrealized loss, net of deferred taxes, on investments of $427. PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company is a named defendant in a purported class action captioned Weisburgh, et al. v. St. Jude Medical, Inc. et al. filed July 2, 1992 in the United States District Court for the District of Minnesota, and later amended. The second amended complaint also names as defendants certain officers and directors alleged to control the Company. The plaintiff purports to represent a class consisting of all persons who purchased common stock of the Company during the period from December 17, 1991 through July 2, 1992. The second amended complaint alleges that the defendants deceived the investing public regarding the Company's finances, financial condition and present and future prospects and induced the plaintiff class to purchase the Company's common stock during the period prior to July 2, 1992 at inflated prices. The second amended complaint asserts claims for federal securities fraud, common law fraud and negligent misrepresentation. The second amended complaint seeks damages (including punitive damages) in an unspecified amount, attorney's fees, costs and expenses. The district court has dismissed the complaint and the plaintiff has filed an appeal which is pending. Item 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS None Item 3. DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES Not applicable Item 4. RESULTS OF VOTES OF SECURITY HOLDERS The Company held its annual meeting of shareholders on May 3, 1995. In conjunction therewith, proxies were solicited in accordance with Regulation 14A. The following actions were taken: (1) William R. Miller, Kenneth G. Langone, and Gail R. Wilensky were elected to the Board of Directors for terms ending in 1998. Shareholders approved management's nominees to the Board of Directors by votes as follows: 34,586,286, 34,614,171 and 34,592,964 in favor, 205,089, 177,204 and 198,411 withheld for Messrs. Miller and Langone and Dr. Wilensky, respectively. Six other directors are serving unexpired terms as follows: Lawrence A. Lehmkuhl, Thomas H. Garrett III and Roger G. Stoll - through 1996; and Charles V. Owens, Ronald A. Matricaria, and Walter L. Sembrowich - through 1997. (2) The shareholders approved the St. Jude Medical, Inc. Management Incentive Compensation Plan by a vote of 31,519,679 in favor of the Plan, 2,236,666 opposed to the Plan and 541,259 abstained from voting. (3) The shareholders approved the reappointment of Ernst & Young LLP as the Company's independent auditor for the current fiscal year by a vote of 34,574,644 in favor of the reappointment, 87,087 opposed to the reappointment and 129,444 abstained from voting. Item 5. OTHER INFORMATION None Item 6. EXHIBITS and REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Exhibit 2 Not applicable 4 Amended and Restated Rights Agreement dated as of June 26, 1990 between the Company and Norwest Bank Minneapolis, N.A., as Rights Agent including the Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock is incorporated by reference to Exhibit 1 of the Registrant's Form 8 Amendment 2 to Form 8-A dated July 6, 1990. 10 Not applicable 22 Not applicable 23 Not applicable 24 Not applicable 27 Financial Data Schedule for SEC use. (b) None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized. ST. JUDE MEDICAL, INC. May 5, 1995 /s/ STEPHEN L. WILSON DATE STEPHEN L. WILSON Vice President - Finance and Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2
5 1,000 3-MOS DEC-31-1995 MAR-31-1995 16,937 124,489 163,290 6,319 134,151 460,114 163,903 30,422 945,065 129,228 0 4,653 0 0 586,184 945,065 180,499 180,499 59,106 59,106 0 639 4,018 44,325 13,741 30,584 0 0 0 30,584 .65 .65
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