-----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, NENpTmWUZnngGgR3XlO+/ryCbXwJQve64m3/63bgl7O02k14TvmoimbNFhQAN3nB 3Ts61VIQr1rkmouvJ72P0Q== 0000024654-94-000008.txt : 19941104 0000024654-94-000008.hdr.sgml : 19941104 ACCESSION NUMBER: 0000024654-94-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941031 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORDIS CORP CENTRAL INDEX KEY: 0000024654 STANDARD INDUSTRIAL CLASSIFICATION: 3841 IRS NUMBER: 590870525 STATE OF INCORPORATION: FL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03274 FILM NUMBER: 94556978 BUSINESS ADDRESS: STREET 1: 14201 NW 60 AVE CITY: MIAMI LAKES STATE: FL ZIP: 33014 BUSINESS PHONE: 3058242000 MAIL ADDRESS: STREET 1: 14201 N W 60TH CITY: MIAMI LAKES STATE: FL ZIP: 33014 10-Q 1 SEC FORM 10-Q UNITED STATES 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 the quarterly period ended September 30, 1994 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 0-3274 CORDIS CORPORATION (Exact name of registrant as specified in its charter) FLORIDA 59-0870525 (State or other jurisdiction of (I.R.S. Employer Identifi- incorporation or organization) cation Number) 14201 N.W. 60th Avenue, Miami Lakes, Florida 33014 (Address of principal executive offices) (Zip Code) (305) 824-2000 (Registrant's telephone number, including area code) No Changes (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 The registrant had outstanding 16,093,537 shares of common stock (par value $1.00 per share) as of October 27, 1994. CORDIS CORPORATION FORM 10-Q THREE MONTHS ENDED SEPTEMBER 30, 1994 INDEX Page No. PART I. FINANCIAL INFORMATION: Item 1. Financial Statements ........................ 1 Consolidated Statements of Operations........ 2 Consolidated Balance Sheets ................. 3 Consolidated Statements of Cash Flows ....... 4 Notes to Consolidated Financial Statements .. 5-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................. 7-8 PART II. OTHER INFORMATION: Item 1. Legal Proceedings............................ 9 Item 4. Submission of Matters to a Vote of Security Holders ....................... 9-10 Item 6. Exhibits and Reports on Form 8-K ............ 10 Signature .................................................. 10 PART I. FINANCIAL INFORMATION Item 1. Financial Statements The interim financial information herein is unaudited. However, in the opinion of Management, such information reflects all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the information shown. The financial statements and notes presented herein do not contain certain information included in the Company's annual financial statements and notes. Results for interim periods are not necessarily indicative of results expected for the full year. CORDIS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended September 30, 1994 and 1993 (Unaudited) (Dollars in thousands except per share amounts) 1994 1993 Net sales $ 98,111 $ 73,147 Operating costs and expenses: Cost of goods sold 38,046 28,372 Research and development 7,870 5,955 Selling, general and administrative 33,073 24,446 Total operating costs and expenses 78,989 58,773 Operating profit 19,122 14,374 Other (income)deductions: Interest expense, net and other (583) 314 Income before income taxes and cumulative effect of accounting change 19,705 14,060 Provision for income taxes 8,072 5,337 Income before cumulative effect of accounting change 11,633 8,723 Cumulative effect of accounting change - 10,115 Net income $ 11,633 $ 18,838 ========= ========= Earnings per share: Income before cumulative effect of accounting change $ .70 $ .53 Cumulative effect of accounting change - .62 Net income $ .70 $ 1.15 ========= ========= See accompanying notes. CORDIS CORPORATION CONSOLIDATED BALANCE SHEETS September 30, 1994 and June 30, 1994 (Dollars in thousands) September 30 June 30 ASSETS (Unaudited) (Audited) Current assets: Cash and cash equivalents $ 51,054 $ 48,531 Short-term investments, at lower of cost or market 7,025 7,055 Accounts receivable, net 84,691 82,502 Inventories: Finished goods 29,326 25,770 Work-in-process 13,639 12,483 Raw materials and supplies 9,884 9,913 52,849 48,166 Deferred income taxes 11,201 10,350 Other current assets 5,593 5,942 Total current assets 212,413 202,546 Property, plant and equipment, net of accumulated depreciation of $68,229 at September 30 and $64,509 at June 30 74,989 71,247 Deferred income taxes 5,324 6,844 Other assets 7,302 7,490 $ 300,028 $ 288,127 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 8,428 $ 9,057 Accounts payable 10,651 10,916 Accrued expenses 39,726 50,329 Income taxes payable 10,084 5,245 Current portion of long-term debt 575 613 Total current liabilities 69,464 76,160 Long-term liabilities: Long-term debt 1,842 1,894 Other long-term liabilities 10,215 7,234 Total long-term liabilities 12,057 9,128 Total liabilities 81,521 85,288 Commitments and contingencies (Note 3) Shareholders' equity: Common stock, $1 par value; authorized 50,000,000 shares; issued and outstand- ing 16,077,261 shares at September 30 and 16,001,206 shares at June 30 16,077 16,001 Capital in excess of par value 64,425 62,016 Retained earnings 127,291 115,658 Foreign currency translation adjustments 10,714 9,164 Total shareholders' equity 218,507 202,839 $ 300,028 $ 288,127 ========== ========== See accompanying notes. CORDIS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended September 30, 1994 and 1993 (Unaudited) (Dollars in thousands) 1994 1993 Cash flows from operating activities: Net income $ 11,633 $ 18,838 Noncash items included therein: Cumulative effect of accounting change - (10,115) Depreciation and amortization 3,050 2,376 Deferred income tax provision 1,567 1,126 Provisions for inventory obsolescence, doubtful accounts and other 257 903 (Gain) loss on disposition of property, plant and equipment (23) 67 Currency transaction losses 94 757 Changes in assets and liabilities: Increase in accounts receivable (1,063) (2,485) Increase in inventories (3,757) (2,034) Decrease (increase)in other current assets 497 (634) Decrease in other assets 151 294 (Decrease)increase in accounts payable and accruals (10,041) 2,207 Increase in current and deferred income taxes payable, net 4,645 2,446 Other, net 1,642 287 Net cash provided by operating activities 8,652 14,033 Cash flows from investing activities: Additions to property, plant and equipment (5,613) (3,220) Proceeds from the sale of property, plant and equipment 25 31 Net cash used in investing activities (5,588) (3,189) Cash flows from financing activities: Debt retirement (1,000) (4,235) Proceeds from the sale of common stock 275 241 Repurchases of common stock - (1,100) Net cash used in financing activities (725) (5,094) Effect of exchange rate changes on cash 184 24 Increase in cash and cash equivalents 2,523 5,774 Cash and cash equivalents: Beginning of period 48,531 42,042 End of period $ 51,054 $ 47,816 ========= ========= See accompanying notes. CORDIS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"), Accounting for Income Taxes. The cumulative effect on prior periods of this accounting change of $10.1 million, or $.62 per share, was reported as a one time benefit in the Consolidated Statement of Operations for the three months ended September 30, 1993. SFAS No. 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, SFAS No. 109 generally considers all expected future events other than enactments of changes in the tax law or rates. Included in the provision for income taxes in the Consolidated Statement of Operations for the three months ended September 30, 1993 is a one time benefit related to the Company increasing its net deferred tax asset by approximately $400,000, or $0.03 per share, as a result of legislation enacted in August 1993 increasing the U.S. corporate tax rate from 34% to 35%. 2) Primary earnings per share of common stock have been determined on the basis of the average number of shares of common stock and common stock equivalents outstanding during the respective periods. The exercise of outstanding options, computed under the treasury stock method based upon average stock prices during the period, has been included in the computation when dilutive. The computation of fully diluted earnings per share results in no material dilution. 3) During fiscal 1987, the Company initiated a plan to dispose of all businesses other than its angiographic and neuroscience product lines. This plan included the disposal of the worldwide cardiac pacing operations, of which the Administrative and Technical Center ("ATC") in Miami, Florida was a principal asset. ATC is held under a capitalized lease that expires in December 2005. In September 1991, the Company executed an agreement to sublease ATC for a term equal to the remaining term of the capital lease. The sublease gives the sublessee cancellation options at the end of the fifth and tenth years, and an option to extend the lease for five years or to purchase the facility at December 31, 2005. In September 1994, the sublessee's parent entered into an agreement to sell the sublessee. The Company has been verbally notified that the sublessee will either exercise its cancellation option on December 31, 1996 or assign the sublease to a third party acceptable to the Company. If the sublessee exercises the cancellation option, it will be required to refund $3.8 million in leasehold improvement allowances. The Company believes that such repayment, combined with the current reserve for future carrying costs, will be sufficient to cover the carrying costs of the building until a replacement tenant can be found. The assets and liabilities related to ATC have been classified in the balance sheets as net liabilities of discontinued operations, and are reflected below in thousands: September 30, June 30, 1994 1994 Net property, plant and equipment $ 17,419 $ 17,805 Other assets 1,294 1,307 Liabilities (16,428) (16,628) Reserve for future costs (8,630) (6,316) (6,345) (3,832) Amount included in current liabilities 815 842 Net liabilities - non-current $ (5,530) $ (2,990) ============ =========== The reserve for future costs relates principally to the discounted shortfall in rental income from the sublease compared to the Company's underlying payments and other costs over the full term of the capitalized lease. In anticipation of the potential cancellation of the sublease mentioned above, the Company increased the reserve balance in the first quarter of fiscal 1995. 4) In April 1993, the Company's Board of Directors authorized the repurchase of up to 500,000 shares of the Company's outstanding common stock. During the three months ended September 30, 1993, the Company entered into commitments to repurchase 37,000 shares of its common stock with a value of $1.1 million. This repurchase program was completed in June 1994. In August 1994, the Company's Board of Directors authorized the repurchase of up to 500,000 shares of the Company's outstanding common stock. Repurchases will be made from time to time in the open market or private transactions, including block trades, with the number of shares actually to be purchased and the price the Company will pay dependent upon market conditions. Repurchased shares will be made available for use in employee benefit and incentive plans. No shares have been repurchased to date under the August 1994 program. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources During the quarter ended September 30, 1994, operations generated cash of approximately $8.7 million. The $5.4 million decrease from the first quarter of fiscal 1994 was principally due to reductions in accounts payable and accrued expenses balances, offset by higher income. Cash used in investing activities was $5.6 million, $2.4 million higher than last year due to an increase in capital expenditures. Cash used in financing activities was $0.7 million, a $4.4 million decrease from a year ago due to lower debt retirement and nonrecurring repurchases of common stock. Working capital was $142.9 million at September 30, 1994, a $16.6 million increase from June 30, 1994. The increase was principally due to cash generated from operations, lower accounts payable and accrued expenses and higher inventory levels. Between June 30 and September 30, the current ratio increased to 3.1 from 2.7. The Company has a $25 million line of credit and a $2 million letter of credit facility with a U.S. bank. No borrowings were outstanding under the agreement either at September 30, 1994 or June 30, 1994. In addition, the Company continues its policy of borrowing funds in Europe to provide financing of local receivables and to partially hedge its foreign currency positions. At September 30, 1994 such loans totaled $8.4 million compared to $9.1 million at June 30, 1994. Management anticipates that cash generated from operations during the remainder of the fiscal year and cash on hand, combined, if necessary, with the utilization of credit lines in the U.S. and Europe, will be sufficient to meet the Company's current operating requirements, and to cover the shortfall in rental income from the sublease of ATC compared to the underlying lease payments over the lease term and the effects of the potential cancellation of the ATC sublease by the sublessee. On a long-term basis, management will continue to address the Company's liquidity requirements and implement any necessary financing strategies. Net Sales For the three months ended September 30, 1994, net sales were $98.1 million, $25.0 million (34%) ahead of the corresponding prior period due to increased sales volume. Had currency exchange rates remained constant throughout the periods, worldwide net sales would have increased by 30%. Foreign sales increased $19.1 million (47%) and accounted for 61% of total sales. At constant currency exchange rates, the increase in foreign sales would have been 41%. Angiography sales for the quarter totaled $94.2 million, up $24.8 million (36%). Neuroscience product sales were $3.9 million, up $0.1 million (3%) from last year. At constant currency exchange rates angiography and neuroscience sales would have increased by 32% and 1%, respectively. Operating Costs and Expenses Cost of goods sold was 39% of net sales in both three month periods ended September 30, 1994 and 1993. The gross profit margin remained the same for the current quarter as the effect of higher sales of higher-margin angioplasty products was offset by higher royalty expenses on increased sales of PTCA balloon catheters. Research and development expenses were $7.9 million for the three months, up $1.9 million (32%) from the first quarter a year ago. Most of the increase was attributable to higher spending on neuroendoscopy and laparoscopy products in the U.S. and diagnostic angiography products in Europe. Research and development expenses were 8% of net sales in both quarters. Selling, general and administrative ("SG&A") expenses were $33.1 million, up $8.6 million (35%), from $24.4 million in the prior year. The increase in SG&A expenses was principally due to higher sales commissions and promotional expenses due to the increased sales levels compared to last year, higher salaries and employee benefits due to headcount increases in sales and marketing, and higher legal expenses and employee incentive expenses. Expressed as a percent of net sales, SG&A expenses were 34% and 33% respectively. Interest Expense, Net and Other Interest expense, net and other increased by $0.9 million due principally to a non-recurring reserve for a litigation settlement in the prior year quarter, higher interest income and lower currency transaction losses. Income Taxes The consolidated effective income tax rate for the three months ended September 30, 1994 was 41% compared to 38% in the year- earlier quarter. The increase in the effective income tax rate was primarily caused by a one-time benefit of approximately $400,000 for the three months ended September 30, 1993 related to the Company increasing its deferred tax asset as a result of legislation enacted in August 1993 increasing the U.S. corporate tax rate from 34% to 35%. Net Income Income before the cumulative effect of an accounting change was $11.6 million ($0.70 per share) for the three months ended September 30, 1994 compared to $8.7 million ($0.53 per share) a year ago. Net income was $11.6 million ($0.70 per share) compared to $18.8 million ($1.15 per share). PART II. OTHER INFORMATION Item 1. Legal Proceedings In the case by a former employee alleging entitlement to lump sum distributions under the Company's Retirement Plan, the Eleventh Circuit Court of Appeals has affirmed the decision of the District Court granting the Company's Motion to Dismiss. The Company has instituted several patent infringement actions against certain Schneider companies in Great Britain, Germany, Italy, France, and The Netherlands alleging that certain Schneider products infringe the Company's patents relating to its nylon balloon technology. A Settlement Conference was held in the pacemaker product liability class action on September 29, 1994 in Dayton, Ohio. To facilitate settlement discussions, the judge ruled that the litigation would be stayed pending the conclusion of settlement negotiations. Subsequent to the Company's claim upon Bard that a license of technology to Schneider required a reduction of royalties due from the Company to Bard pursuant to the "more reasonable terms" clause of the settlement agreement, Bard filed a Motion in the U.S. District Court in Boston, Massachusetts to have the matter reviewed and ruled upon by the Court which heard the initial case. The Company and Bard briefed the issues and the matter was set for hearing on October 3, 1994. Both sides argued the Motion and the Judge took the matter under advisement without indicating when a ruling would be forthcoming. The Company continues to accrue but withhold payment of the royalties until such time as a final determination of the rights of the Company and Bard are determined by the U.S. District Court. Item 4. Submission of Matters to a Vote of Security Holders An Annual Meeting of Shareholders of the Company was held on October 27, 1994. There were 12,885,564 shares of common stock represented at the meeting in person or by proxy. The following business was transacted: Proxies for the meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934. There were no solicitations in opposition to management's nominees for Directors as listed in the Proxy Statement and all such nominees were elected. The Board of Directors' selection of Deloitte & Touche to be the Company's independent auditors for the fiscal year ending June 30, 1995, was ratified by 12,826,055 votes. There were 51,141 votes against with 8,368 abstentions. The motion to increase the number of shares reserved for grants under the Cordis Corporation Non-Qualified Stock Option Plan was approved by 8,273,603 votes. There were 3,678,576 votes against, with 933,385 abstentions. The motion to limit the maximum number of additional options to acquire shares that may be granted in the future to an employee under the Cordis Corporation Non-Qualified Stock Option Plan was approved by 11,657,668 votes. There were 287,677 votes against, with 940,219 abstentions. Item 6. Exhibits and Reports on Form 8-K a) Exhibit 11 Computation of primary earnings per share. b) No reports were filed on Form 8-K during the three months ended September 30, 1994. SIGNATURE 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. CORDIS CORPORATION By: Alfred J. Novak Alfred J. Novak, Vice President and Chief Financial Officer (principal financial officer) Date: October 31, 1994 EX-11 2 Exhibit 11 CORDIS CORPORATION COMPUTATION OF PRIMARY EARNINGS PER SHARE Three Months Ended September 30, 1994 and 1993 (Unaudited) (Dollars in thousands except per share amounts) 1994 1993 Income: Income before cumulative effect of accounting change $ 11,633 $ 8,723 Cumulative effect of accounting change - 10,115 Net income $ 11,633 $ 18,838 ======== ======== Common Shares (000): Weighted average common shares outstanding 16,029 15,936 Equivalent shares from outstand- ing options (1) 515 443 Total 16,544 16,379 ======== ======== Earnings per share: Income before cumulative effect of accounting change $ .70 $ .53 Cumulative effect of accounting change - .62 Net income $ .70 $ 1.15 ======== ======== (1) Computed using the treasury stock method based on the average price during the periods. NOTE: The computation of earnings per share on the fully diluted basis is the same as that set forth above. EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CORDIS CORPORATION FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-1995 SEP-30-1994 51,054 7,025 84,691 0 52,849 212,413 143,218 68,229 300,028 69,464 0 16,077 0 0 202,430 300,028 98,111 98,111 38,046 78,989 0 0 330 19,705 8,072 11,633 0 0 0 11,633 0.70 0.70
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