10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2008
OR
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o |
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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 000-06516
DATASCOPE CORP.
(Exact name of registrant as specified in its charter)
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Delaware
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13-2529596 |
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(State of other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification
No.) |
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14 Philips Parkway, Montvale, New Jersey
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07645-9998 |
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(Address of principal executive offices)
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(Zip Code) |
(201) 391-8100
(Registrant’s telephone number, including area code)
(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 þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
þ |
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Non-accelerated filer o |
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). YES o NO þ
Number of Shares of Company’s Common Stock outstanding as of April 30, 2008: 15,658,507.
Datascope Corp.
Form 10-Q Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Datascope Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
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March 31, |
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June 30, |
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2008 |
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2007 |
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(Unaudited) |
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(a) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
17,588 |
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$ |
15,780 |
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Short-term investments |
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21,088 |
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23,681 |
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Accounts receivable less allowance for
doubtful accounts of $2,603 |
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86,593 |
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85,553 |
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Inventories |
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38,247 |
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59,455 |
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Prepaid income taxes |
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— |
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2,293 |
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Prepaid expenses and other current assets |
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14,736 |
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11,167 |
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Current deferred taxes |
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7,048 |
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7,238 |
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Current assets of discontinued operations |
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29,775 |
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— |
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Total current assets |
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215,075 |
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205,167 |
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Property, plant and equipment, net of accumulated
depreciation of $74,945 and $100,760 |
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51,593 |
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82,812 |
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Long-term investments |
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24,323 |
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14,346 |
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Intangible assets, net |
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19,608 |
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26,074 |
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Goodwill |
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1,781 |
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12,860 |
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Other assets |
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30,341 |
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34,897 |
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Noncurrent assets of discontinued operations |
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61,850 |
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— |
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$ |
404,571 |
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$ |
376,156 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
9,709 |
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$ |
18,386 |
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Dividends payable |
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— |
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1,532 |
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Accrued expenses |
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12,477 |
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16,129 |
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Accrued compensation |
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16,190 |
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17,422 |
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Deferred revenue |
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2,568 |
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4,380 |
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Income taxes payable |
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3,099 |
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— |
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Current liabilities of discontinued operations |
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18,681 |
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— |
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Total current liabilities |
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62,724 |
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57,849 |
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Other liabilities |
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24,461 |
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25,220 |
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Other liabilities of discontinued operations |
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1,738 |
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— |
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Commitments and contingencies (Note 11) |
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Stockholders’ equity: |
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Preferred stock, par value $1.00 per share: |
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Authorized 5,000 shares; Issued, none |
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— |
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— |
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Common stock, par value $0.01 per share: |
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Authorized, 45,000 shares; |
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Issued, 19,228 and 18,867 shares |
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192 |
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189 |
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Additional paid-in capital |
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120,224 |
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109,384 |
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Treasury stock at cost, 3,567 and 3,521 shares |
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(108,897 |
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(107,037 |
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Retained earnings |
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299,836 |
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294,765 |
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Accumulated other comprehensive loss: |
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Cumulative translation adjustments |
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9,843 |
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1,899 |
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Benefit plan adjustments |
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(5,641 |
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(5,827 |
) |
Unrealized gain (loss) on available-for-sale securities |
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91 |
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(286 |
) |
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Total stockholders’ equity |
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315,648 |
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293,087 |
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$ |
404,571 |
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$ |
376,156 |
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(a) Derived from audited consolidated financial statements.
See notes to unaudited condensed consolidated financial statements.
1
Datascope Corp. and Subsidiaries
Condensed Consolidated Statements of Earnings
(In thousands, except per share amounts)
(Unaudited)
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Nine Months Ended |
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Three Months Ended |
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March 31, |
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March 31, |
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2008 |
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2007 |
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2008 |
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2007 |
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Net sales |
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$ |
170,761 |
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$ |
164,237 |
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$ |
61,323 |
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$ |
57,842 |
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Cost of sales |
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59,608 |
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57,778 |
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20,948 |
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20,787 |
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Gross profit |
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111,153 |
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106,459 |
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40,375 |
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37,055 |
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Operating expenses: |
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Research and development expenses |
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16,875 |
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17,210 |
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6,020 |
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5,544 |
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Selling, general and administrative expenses |
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69,513 |
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69,062 |
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23,717 |
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22,676 |
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Special items |
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— |
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5,574 |
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— |
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(804 |
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86,388 |
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91,846 |
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29,737 |
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27,416 |
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Operating earnings |
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24,765 |
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14,613 |
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10,638 |
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9,639 |
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Other (income) expense: |
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Interest income |
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(1,668 |
) |
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(1,910 |
) |
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(568 |
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(569 |
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Interest expense |
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113 |
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87 |
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28 |
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22 |
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Dividend income |
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— |
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(196 |
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— |
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— |
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Gain on sale of investment |
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(13,173 |
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(1,273 |
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— |
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— |
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Other, net |
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(48 |
) |
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370 |
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(295 |
) |
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146 |
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(14,776 |
) |
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(2,922 |
) |
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(835 |
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(401 |
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Earnings from continuing operations before income taxes |
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39,541 |
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17,535 |
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11,473 |
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10,040 |
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Income taxes |
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13,028 |
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4,473 |
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2,433 |
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3,059 |
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Net earnings from continuing operations |
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26,513 |
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13,062 |
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9,040 |
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6,981 |
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Net earnings from discontinued operations |
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1,457 |
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2,667 |
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49 |
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|
880 |
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Net earnings |
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$ |
27,970 |
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$ |
15,729 |
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$ |
9,089 |
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$ |
7,861 |
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Net earnings per share, basic: |
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Continuing operations |
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$ |
1.73 |
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$ |
0.86 |
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$ |
0.59 |
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$ |
0.46 |
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Discontinued operations |
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0.09 |
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0.17 |
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— |
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0.06 |
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Net earnings |
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$ |
1.82 |
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$ |
1.03 |
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$ |
0.59 |
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$ |
0.52 |
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Weighted average number of common
shares outstanding, basic |
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15,369 |
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15,223 |
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15,407 |
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15,242 |
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Net earnings per share, diluted: |
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Continuing operations |
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$ |
1.71 |
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$ |
0.85 |
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$ |
0.58 |
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$ |
0.45 |
|
Discontinued operations |
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0.09 |
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|
0.17 |
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— |
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|
0.06 |
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Net earnings |
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$ |
1.80 |
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$ |
1.02 |
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$ |
0.58 |
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$ |
0.51 |
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Weighted average number of common
shares outstanding, diluted |
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15,519 |
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|
15,488 |
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|
15,566 |
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|
15,544 |
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Cash dividends declared per common share |
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$ |
1.30 |
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$ |
1.27 |
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$ |
0.20 |
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$ |
0.10 |
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See notes to unaudited condensed consolidated financial statements.
2
Datascope Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Nine Months Ended |
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March 31, |
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2008 |
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2007 |
|
Operating Activities: |
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Net earnings |
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$ |
27,970 |
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$ |
15,729 |
|
Adjustments to reconcile net earnings to net
cash provided by operating activities: |
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Depreciation |
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10,371 |
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|
11,444 |
|
Amortization |
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4,390 |
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|
4,603 |
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Provision for supplemental pension and post-retirement medical |
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|
1,028 |
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|
976 |
|
Provision for losses on accounts receivable |
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276 |
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|
218 |
|
Cash surrender value of officers life insurance |
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(193 |
) |
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(288 |
) |
Gain on sale of asset |
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— |
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(2,235 |
) |
Realized gain on sale of investment |
|
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(13,173 |
) |
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|
(1,268 |
) |
Stock-based compensation expense |
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|
897 |
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|
642 |
|
Excess tax benefits on stock-based compensation |
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(695 |
) |
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(186 |
) |
Deferred income tax (benefit) expense |
|
|
— |
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|
311 |
|
Special charges asset write-offs |
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|
— |
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|
365 |
|
Intangible assets impairment |
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|
841 |
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|
— |
|
Changes in assets and liabilities: |
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Accounts receivable |
|
|
(305 |
) |
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|
405 |
|
Inventories |
|
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(5,530 |
) |
|
|
(4,529 |
) |
Prepaid expenses and other assets |
|
|
(2,604 |
) |
|
|
(1,597 |
) |
Accounts payable |
|
|
388 |
|
|
|
(1,433 |
) |
Income taxes payable |
|
|
5,132 |
|
|
|
— |
|
Accrued and other liabilities |
|
|
(3,269 |
) |
|
|
(2,708 |
) |
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|
|
|
|
|
|
Net cash
(used in) provided by operating activities |
|
|
25,524 |
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|
20,449 |
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Investing Activities: |
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Capital expenditures |
|
|
(5,483 |
) |
|
|
(4,052 |
) |
Proceeds from asset sale |
|
|
— |
|
|
|
3,000 |
|
Purchases of investments |
|
|
(58,695 |
) |
|
|
(72,329 |
) |
Proceeds from investment maturities |
|
|
47,172 |
|
|
|
59,912 |
|
Proceeds from investment sales |
|
|
18,309 |
|
|
|
23,826 |
|
Capitalized software |
|
|
(5,661 |
) |
|
|
(5,712 |
) |
Purchased technology and licenses |
|
|
(13 |
) |
|
|
(2,204 |
) |
Other |
|
|
— |
|
|
|
(88 |
) |
|
|
|
|
|
|
|
Net cash
(used in) provided by investing activities |
|
|
(4,371 |
) |
|
|
2,353 |
|
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Financing Activities: |
|
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Exercise of stock options |
|
|
7,131 |
|
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|
2,628 |
|
Treasury shares acquired under repurchase programs |
|
|
(1,860 |
) |
|
|
(1,718 |
) |
Excess tax benefits on stock-based compensation |
|
|
695 |
|
|
|
186 |
|
Cash dividends paid |
|
|
(21,580 |
) |
|
|
(18,863 |
) |
Guaranteed milestone payments |
|
|
(500 |
) |
|
|
(500 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(16,114 |
) |
|
|
(18,267 |
) |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash |
|
|
(3,231 |
) |
|
|
(712 |
) |
|
|
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|
|
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|
|
|
|
|
|
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|
|
|
Increase in cash and cash equivalents |
|
|
1,808 |
|
|
|
3,823 |
|
Cash and cash equivalents, beginning of period |
|
|
15,780 |
|
|
|
9,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
17,588 |
|
|
$ |
13,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
11,430 |
|
|
$ |
7,862 |
|
|
|
|
|
|
|
|
Income taxes refunded |
|
$ |
3,726 |
|
|
$ |
3,527 |
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Net transfers of inventory to fixed assets
for use as demonstration equipment |
|
$ |
4,423 |
|
|
$ |
4,581 |
|
|
|
|
|
|
|
|
Dividends declared, not paid |
|
$ |
— |
|
|
$ |
1,526 |
|
|
|
|
|
|
|
|
See notes to unaudited condensed consolidated financial statements.
3
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands except per share data)
1. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements include the accounts of
Datascope Corp. and its subsidiaries (the “Company” — which may be referred to as “our”, “us” or
“we”). These statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) for interim 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 U.S. GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for interim periods are not
necessarily indicative of results that may be expected for the full year. The presentation of
certain prior year information has been reclassified to conform with the current year presentation.
The condensed consolidated statements of earnings for the nine months ended March 31, 2008 and for
the three and nine months ended March 31, 2007 have been reclassified to reflect discontinued
operations. In addition, the condensed consolidated statements of earnings for the three and nine
months ended March 31, 2007 includes an adjustment of $1.0 million from selling, general and
administrative expenses to special items related to the classification of inquiry expenses.
Preparation of the Company’s financial statements in conformity with U.S. GAAP requires management
to make estimates and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates. For further information,
refer to the consolidated financial statements and notes included in the Company’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2007.
Recently Adopted Accounting Pronouncements
On July 1, 2007, we adopted the provisions of the Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of
Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes. FIN 48
clarifies the accounting for uncertainty in income taxes by prescribing that a benefit cannot be
recorded in the financial statements unless the tax position has a “more likely than not” chance of
being sustained upon audit based solely on the technical merits of the position. Once the “more
likely than not” standard is met, the benefit is measured by determining the amount that is greater
than 50 percent likely of being realized upon settlement, presuming that the tax position is
examined by the appropriate taxing authority that has full knowledge of all relevant information.
FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition. See Note 13 for additional information related to
the impact of adopting FIN 48.
4
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
1. Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements, Not Required to be Adopted as of March 31, 2008
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157 defines “fair
value” as: the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. In addition, SFAS 157
establishes a fair value hierarchy to be used to classify the source of information used in fair
value measurements, new disclosures of assets and liabilities measured at fair value based on their
level in the hierarchy and a modification of the long-standing accounting presumption that the
transaction price of an asset or liability equals its initial fair value. SFAS 157 is effective for
fiscal years beginning after November 15, 2007 (our fiscal year 2009 beginning July 1, 2008). The
FASB issued Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the
provisions of SFAS 157 relating to nonfinancial assets and liabilities until fiscal years beginning
after November 15, 2008 (our fiscal year 2010 beginning July 1, 2009). SFAS 157 is not expected to
materially affect how we determine fair value, but may result in certain additional disclosures.
In November 2006, the FASB issued Emerging Issues Task Force Issue No. 06-10, Accounting for
Deferred Compensation and Postretirement Benefits Aspects of Collateral Assignment Split-Dollar
Life Insurance Arrangements, which is effective for fiscal years that begin after December 15, 2007
(our fiscal year 2009 beginning July 1, 2008). The Task Force concluded that an employer should
recognize a liability for the postretirement benefit related to a collateral assignment
split-dollar life insurance arrangement in accordance with either FASB Statement No. 106,
Employers’ Accounting for Postretirement Benefits Other Than Pensions, or Accounting Principles
Board Opinion No. 12, Omnibus Opinion, based on the substantive agreement with the employee. The
Task Force also concluded that an employer should recognize and measure an asset based on the
nature and substance of the collateral assignment split-dollar life insurance arrangement. The
Supplemental Benefits Plan for the Chairman and Chief Executive Officer, Mr. Lawrence Saper,
provides survivor benefits in the form of a $10 million life insurance policy, maintained pursuant
to a collateral assignment split-dollar agreement among Mr. Saper, the Company and a trust for the
benefit of Mr. Saper’s family. The present value of the premium reimbursement pursuant to the
split-dollar agreement at March 31, 2008 was approximately $3.4 million. Upon adoption, we will
record a liability and a cumulative effect adjustment to retained earnings for the present value of
the premium reimbursement at the date of adoption.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities — Including an amendment of FASB Statement No. 115. This statement provides
an option to report selected financial assets and liabilities at fair value. In addition, SFAS 159
establishes presentation and disclosure requirements for those assets and liabilities which the
registrant has chosen to measure at fair value. SFAS 159 is effective for fiscal years beginning
after November 15, 2007 (our fiscal year 2009 beginning July 1, 2008). We are currently evaluating
the impact of adopting SFAS 159 on our consolidated financial statements.
5
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
1. Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements, Not Required to be Adopted as of March 31, 2008 (Continued)
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements — an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. SFAS 160 clarifies a noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity that should be reported as equity in the consolidated financial
statements. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008 (our
fiscal year 2010 beginning July 1, 2009). We are currently evaluating the impact of adopting SFAS
160 on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. This statement
establishes principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, the goodwill
acquired and any noncontrolling interest in the acquiree. In addition, SFAS 141(R) establishes
disclosure requirements to enable the evaluation of the nature and financial effects of the
business combination. SFAS 141(R) applies prospectively to business combinations for which the
acquisition date is during fiscal years beginning on or after December 15, 2008, the effective date
of this statement. We will adopt SFAS 141(R) in the first quarter of our fiscal year 2010 beginning
July 1, 2009.
2. Discontinued Operations
In March 2008, we entered into a definitive agreement to sell our Patient Monitoring (“PM”)
business (formerly part of the Cardiac Assist / Monitoring Products segment) to Mindray Medical
International Limited. The sale of the PM business allows us to focus our efforts on the cardiac
assist and vascular graft and peripheral stent businesses. We will receive approximately $209
million in cash at the closing and will retain approximately
$31 million of receivables generated by the PM business. Closing conditions have been satisfied and
the transaction, which will be effective May 1, is expected to close in mid-May.
Net sales
and earnings from discontinued operations before income taxes for the three and nine months ended
March 31, 2008 and 2007 are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
Three Months Ended |
|
|
|
3/31/2008 |
|
|
3/31/2007 |
|
|
3/31/2008 |
|
|
3/31/2007 |
|
Net sales from discontinued operations |
|
$ |
124,707 |
|
|
$ |
116,163 |
|
|
$ |
43,445 |
|
|
$ |
39,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from discontinued operations before income taxes |
|
$ |
2,117 |
|
|
$ |
4,446 |
|
|
$ |
(49) |
|
|
$ |
1,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
2. Discontinued Operations (Continued)
The assets and liabilities classified as discontinued operations as of March 31, 2008 are as
follows:
|
|
|
|
|
Cash and cash equivalents |
|
$ |
64 |
|
Inventories |
|
|
25,266 |
|
Prepaid and other current assets |
|
|
4,257 |
|
Current deferred taxes |
|
|
188 |
|
|
|
|
|
Current assets of discontinued operations |
|
$ |
29,775 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of
accumulated depreciation of $33,287 |
|
$ |
32,533 |
|
Intangible assets, net |
|
|
5,973 |
|
Goodwill |
|
|
12,991 |
|
Other assets |
|
|
10,353 |
|
|
|
|
|
Noncurrent assets of discontinued operations |
|
$ |
61,850 |
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
9,171 |
|
Accrued expenses and other current liabilities |
|
|
7,215 |
|
Deferred revenue |
|
|
2,295 |
|
|
|
|
|
Current liabilities of discontinued operations |
|
$ |
18,681 |
|
|
|
|
|
|
|
|
|
|
Other liabilities of discontinued operations |
|
$ |
1,738 |
|
|
|
|
|
3. Inventories
Inventories are stated at the lower of cost or market, with cost determined on a first-in,
first-out basis.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
Materials |
|
$ |
14,909 |
|
|
$ |
20,189 |
|
Work in process |
|
|
10,635 |
|
|
|
11,253 |
|
Finished goods |
|
|
12,703 |
|
|
|
28,013 |
|
|
|
|
|
|
|
|
|
|
$ |
38,247 |
|
|
$ |
59,455 |
|
|
|
|
|
|
|
|
7
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
4. Stockholders’ Equity
Changes in the components of stockholders’ equity for the nine months ended March 31, 2008 were as
follows:
|
|
|
|
|
Net earnings |
|
$ |
27,970 |
|
Foreign currency translation gain |
|
|
7,944 |
|
Common stock and additional paid-in capital effects of
stock option activity |
|
|
10,843 |
|
Cash dividends declared on common stock |
|
|
(20,084 |
) |
Purchases under stock repurchase plans |
|
|
(1,860 |
) |
Benefit plan adjustments |
|
|
186 |
|
Unrealized gain on available-for-sale securities |
|
|
377 |
|
Cumulative effect of FIN 48 adoption |
|
|
(2,815 |
) |
|
|
|
|
Total increase in stockholders’ equity |
|
$ |
22,561 |
|
|
|
|
|
5. Earnings Per Share
The computation of basic and diluted earnings per share for the three and nine months ended March
31, 2008 and 2007 is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
Three Months Ended |
|
|
|
3/31/2008 |
|
|
3/31/2007 |
|
|
3/31/2008 |
|
|
3/31/2007 |
|
Net earnings |
|
$ |
27,970 |
|
|
$ |
15,729 |
|
|
$ |
9,089 |
|
|
$ |
7,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
for basic earnings per share |
|
|
15,369 |
|
|
|
15,223 |
|
|
|
15,407 |
|
|
|
15,242 |
|
Effect of dilutive employee stock awards |
|
|
150 |
|
|
|
265 |
|
|
|
159 |
|
|
|
302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
for diluted earnings per share |
|
|
15,519 |
|
|
|
15,488 |
|
|
|
15,566 |
|
|
|
15,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
1.82 |
|
|
$ |
1.03 |
|
|
$ |
0.59 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
1.80 |
|
|
$ |
1.02 |
|
|
$ |
0.58 |
|
|
$ |
0.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares related to options outstanding under our stock option plans amounting to 618 thousand
and 824 thousand shares for the nine months ended March 31, 2008 and 2007, respectively, were
excluded from the computation of diluted earnings per share as the effect would have been
antidilutive. For the three months ended March 31, 2008 and 2007, 533 thousand and 718 thousand
shares, respectively, were excluded from the calculation for the same reason.
8
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
6. Comprehensive Income
Comprehensive income for the three and nine months ended March 31, 2008 and 2007 is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
Three Months Ended |
|
|
|
3/31/2008 |
|
|
3/31/2007 |
|
|
3/31/2008 |
|
|
3/31/2007 |
|
Net earnings |
|
$ |
27,970 |
|
|
$ |
15,729 |
|
|
$ |
9,089 |
|
|
$ |
7,861 |
|
Foreign currency translation gain |
|
|
7,944 |
|
|
|
1,407 |
|
|
|
4,342 |
|
|
|
439 |
|
Benefit plan adjustments |
|
|
186 |
|
|
|
— |
|
|
|
42 |
|
|
|
— |
|
Unrealized gain (loss) on
available-for-sale
securities, net of tax |
|
|
377 |
|
|
|
184 |
|
|
|
5 |
|
|
|
(43 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
36,477 |
|
|
$ |
17,320 |
|
|
$ |
13,478 |
|
|
$ |
8,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Segment Information
We develop, manufacture and sell medical devices in two reportable segments, Cardiac Assist
Products and Interventional / Vascular Products.
The Cardiac Assist Products segment includes electronic intra-aortic balloon pumps and catheters
that are used in the treatment of cardiovascular disease, endoscopic vessel harvesting products
that provide a less-invasive alternative to surgical harvesting of blood vessels for use in
coronary bypass and manual compression assist devices used to stop bleeding following femoral
arterial catheterization in diagnostic and interventional procedures.
The Interventional / Vascular Products segment includes vascular closure devices, which are used to
seal arterial puncture wounds after cardiovascular catheterization procedures, interventional
radiology products used in dialysis access, and a proprietary line of knitted and woven polyester
vascular grafts, patches and graft stents for reconstructive vascular and cardiovascular surgery.
We have aggregated our product lines into two reportable segments based on similar manufacturing
processes, economic characteristics, distribution channels, regulatory environments and customers.
Management evaluates the revenue and profitability performance of each of our product lines to make
operating and strategic decisions. We have no intersegment revenue.
Prior to March 31, 2008, the financial results of the Patient Monitoring business were reported
within the Cardiac Assist / Monitoring Products segment. As a result of the pending sale of the PM
business we have changed our segment reporting to exclude the financial results of PM and have
renamed the segment to Cardiac Assist Products.
9
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
7. Segment Information (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardiac
Assist
Products |
|
|
Interventional/
Vascular
Products |
|
|
Corporate
and
Other |
|
|
Continuing
Operations |
|
Nine months ended March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
138,115 |
|
|
$ |
31,680 |
|
|
$ |
966 |
|
|
$ |
170,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
$ |
26,040 |
|
|
$ |
(579 |
) |
|
$ |
(696 |
) |
|
$ |
24,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
134,444 |
|
|
$ |
90,674 |
|
|
$ |
87,828 |
|
|
$ |
312,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
131,707 |
|
|
$ |
31,627 |
|
|
$ |
903 |
|
|
$ |
164,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
$ |
24,793 |
|
|
$ |
(7,982 |
) |
|
$ |
(2,198 |
) |
|
$ |
14,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
119,918 |
|
|
$ |
81,381 |
|
|
$ |
100,994 |
|
|
$ |
302,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
49,176 |
|
|
$ |
11,811 |
|
|
$ |
336 |
|
|
$ |
61,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
$ |
10,601 |
|
|
$ |
572 |
|
|
$ |
(535 |
) |
|
$ |
10,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
|
$ |
46,387 |
|
|
$ |
11,129 |
|
|
$ |
326 |
|
|
$ |
57,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
$ |
9,244 |
|
|
$ |
1,867 |
|
|
$ |
(1,472 |
) |
|
$ |
9,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to earnings from
continuing operations |
|
Nine Months Ended |
|
|
Three Months Ended |
|
before income taxes: |
|
3/31/2008 |
|
|
3/31/2007 |
|
|
3/31/2008 |
|
|
3/31/2007 |
|
Operating earnings from continuing operations |
|
$ |
24,765 |
|
|
$ |
14,613 |
|
|
$ |
10,638 |
|
|
$ |
9,639 |
|
Interest income, net |
|
|
1,555 |
|
|
|
1,823 |
|
|
|
540 |
|
|
|
547 |
|
Dividend income |
|
|
— |
|
|
|
196 |
|
|
|
— |
|
|
|
— |
|
Gain on sale of investment |
|
|
13,173 |
|
|
|
1,273 |
|
|
|
— |
|
|
|
— |
|
Other, net |
|
|
48 |
|
|
|
(370 |
) |
|
|
295 |
|
|
|
(146 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations before income taxes |
|
$ |
39,541 |
|
|
$ |
17,535 |
|
|
$ |
11,473 |
|
|
$ |
10,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning fiscal 2008, net sales of Safeguard™ and the product’s associated operating loss are now
included within the Cardiac Assist Products segment (formerly reported in the Interventional /
Vascular Products segment). Net sales and operating earnings for the three and nine months ended
March 31, 2007 for both segments have been adjusted to reflect this change.
Operating earnings within Cardiac Assist Products for the nine months ended March 31, 2007 includes
special charges of $1.0 million related to the workforce reductions in the European sales
organization.
Operating loss within Interventional / Vascular Products for the nine months ended March 31, 2007
includes special items of $3.4 million comprising charges of $5.6 million related to the plan to
phase out the Interventional Products (“IP”) business and the workforce reductions in the European
sales organization, partially offset by the gain on sale of ProGuide™ assets of $2.2 million.
Operating earnings for the three months ended March 31, 2007 includes the gain on sale of the
ProGuide assets of $2.2 million, offset by a charge of $0.4 million related to the IP business exit
plan.
10
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
7. Segment Information (Continued)
Operating loss within Corporate and Other for the three and nine months ended March 31, 2007
includes special charges of $1.0 million related to the inquiry expenses. Net sales of life science
products are included within this segment. Segment SG&A expenses include allocated corporate G&A
charges.
8. Stock-Based Awards
We maintain the following equity incentive plans: the 2005 Equity Incentive Plan, the Amended and
Restated 1995 Employee Stock Option Plan, the Amended and Restated Non-Employee Director Plan and
option agreements with certain consultants.
The 2005 Equity Incentive Plan (“2005 Plan”), approved by the stockholders in December 2005,
authorized 1,200,000 shares covering several different types of awards, including stock options,
performance shares, performance units, stock appreciation rights, restricted shares and deferred
shares.
The stock option plans provide that options may be granted at an exercise price of 100% of fair
market value of our common stock on the date of grant, may be exercised in full or in installments,
at the discretion of the Board of Directors, and must be exercised within ten years from the date
of grant. We recognize stock-based compensation expense on a straight-line basis over the vesting
period, generally four years.
In accordance with SFAS No. 123(R), Share-Based Payment, we recorded stock-based compensation
expense for the cost of stock options and restricted stock (together, “stock-based awards”).
Stock-based compensation expense for the three and nine months ended March 31, 2008 and 2007 was
recorded in the condensed consolidated statements of earnings as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
Three Months Ended |
|
|
|
3/31/2008 |
|
|
3/31/2007 |
|
|
3/31/2008 |
|
|
3/31/2007 |
|
Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
$ |
17 |
|
|
$ |
4 |
|
|
$ |
7 |
|
|
$ |
1 |
|
Research and development expenses |
|
|
84 |
|
|
|
64 |
|
|
|
27 |
|
|
|
24 |
|
Selling, general and administrative expenses |
|
|
605 |
|
|
|
447 |
|
|
|
259 |
|
|
|
223 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
706 |
|
|
$ |
515 |
|
|
$ |
293 |
|
|
$ |
248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense, net
of tax |
|
$ |
417 |
|
|
$ |
305 |
|
|
$ |
173 |
|
|
$ |
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings from discontinued operations |
|
$ |
113 |
|
|
$ |
75 |
|
|
$ |
28 |
|
|
$ |
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
8. Stock-Based Awards (Continued)
The fair value of the stock options granted was estimated on the date of grant using a
Black-Scholes option valuation model that uses the assumptions noted in the following table. The
expected dividend yield is based on the annualized projection of regular and special dividends.
Expected volatility is based on historical volatility for a period equal to the stock option’s
expected life and calculated on a monthly basis. The risk-free rate is based on the U.S. Treasury
yield curve in effect at the time of grant. The expected life (estimated period of time
outstanding) of stock options granted was estimated using the historical exercise behavior of
employees for grants with a 10-year term.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
Three Months Ended |
|
|
March 31, |
|
March 31, |
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
Expected dividend yield |
|
|
* |
|
|
|
4.03 |
% |
|
|
* |
|
|
|
3.85 |
% |
Expected volatility |
|
|
* |
|
|
|
28 |
% |
|
|
* |
|
|
|
27 |
% |
Risk-free interest rate |
|
|
* |
|
|
|
4.58 |
% |
|
|
* |
|
|
|
4.50 |
% |
Expected life (in years) |
|
|
* |
|
|
|
4.8 |
|
|
|
* |
|
|
|
4.8 |
|
There were no stock options granted during the three and nine months ended March 31, 2008.
SFAS 123(R) requires that cash flows resulting from tax benefits attributable to tax deductions in
excess of the stock-based compensation expense recognized for those options (excess tax benefits)
be classified as financing cash flows. As a result, we classified $695 thousand and $186 thousand
of excess tax benefits as financing cash flows for the nine months ended March 31, 2008 and 2007,
respectively.
Stock Options
We have an employee stock compensation plan, the Amended and Restated 1995 Employee Stock Option
Plan, covering 4,150,000 shares of common stock, a non-employee director plan for members of the
Board of Directors covering 150,000 shares of common stock and option agreements with certain
consultants. Stock options have generally been granted with a 4-year vesting period and 10-year
term. The stock options vest in equal annual installments over the vesting period. Under the
provisions of SFAS 123(R), members of the Board of Directors are considered employees.
12
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
8. Stock-Based Awards (Continued)
Stock Options (Continued)
Changes in our stock options for the nine months ended March 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Number of |
|
Average |
|
|
Options |
|
Exercise Price |
Options outstanding, beginning of year |
|
|
1,741,161 |
|
|
$ |
32.47 |
|
Granted |
|
|
— |
|
|
|
— |
|
Exercised |
|
|
(292,506 |
) |
|
|
31.71 |
|
Forfeited/Expired |
|
|
(67,700 |
) |
|
|
34.93 |
|
|
|
|
|
|
|
|
|
|
Options outstanding, end of period |
|
|
1,380,955 |
|
|
|
32.51 |
|
|
|
|
|
|
|
|
|
|
Options vested and expected to vest,
end of period |
|
|
1,360,670 |
|
|
|
32.47 |
|
|
|
|
|
|
|
|
|
|
Options exercisable, end of period |
|
|
1,248,293 |
|
|
|
32.27 |
|
|
|
|
|
|
|
|
|
|
At March 31, 2008, there were 2,100,167 shares of common stock reserved for stock options. We
generally issue shares for the exercise of stock options from unissued reserved shares. We
anticipate that shares repurchased will offset shares to be issued for the stock-based awards and
reduce the dilutive impact of share-based activity. However, since the timing and amount of future
repurchases is not known, we cannot estimate the number of shares expected to be repurchased during
the remainder of fiscal 2008.
The weighted average remaining contractual term was approximately 4.9 years for stock options
outstanding and approximately 4.5 years for stock options exercisable as of March 31, 2008. The
weighted average fair value of options granted during the three and nine months ended March 31,
2007 was $7.34 and $6.83 per share, respectively. There were no stock options issued during the
three and nine months ended March 31, 2008.
The total intrinsic value (the excess of the market price over the exercise price) was
approximately $12.3 million for stock options outstanding and $11.4 million for stock options
exercisable as of March 31, 2008. The total intrinsic value for stock options exercised during the
three and nine months ended March 31, 2008 was approximately $2.0 million and $2.2 million,
respectively. The total intrinsic value for stock options exercised during the three and nine
months ended March 31, 2007 was approximately $0.3 million and $0.6 million, respectively.
The amount of cash received from the exercise of stock options was approximately $7.1 million and
the related tax benefit was approximately $0.7 million for the nine months ended March 31, 2008.
As of March 31, 2008, unrecognized stock-based compensation expense related to stock options was
approximately $1.2 million and is expected to be recognized over a weighted average period of
2.4 years.
13
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
8. Stock-Based Awards (Continued)
Restricted Stock
The following table summarizes restricted stock activity under the 2005 Plan for the nine months
ended March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
Shares |
|
Grant Price |
Nonvested, beginning of year |
|
|
3,908 |
|
|
$ |
35.84 |
|
Awarded |
|
|
70,517 |
|
|
|
32.82 |
|
Released |
|
|
(4,024 |
) |
|
|
35.83 |
|
Forfeited |
|
|
(6,660 |
) |
|
|
32.44 |
|
|
|
|
|
|
|
|
|
|
Nonvested, end of period |
|
|
63,741 |
|
|
|
32.85 |
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008, unrecognized stock-based compensation expense related to nonvested awards was
approximately $1.6 million and is expected to be recognized over a weighted average period of
3.2 years.
9. Retirement Benefit Plans
Defined Benefit Pension Plans — U.S. and International
We have a defined benefit pension plan designed to provide retirement benefits to eligible U.S.
employees. U.S. pension benefits are based on years of service, compensation and the primary social
security benefits. Funding for the U.S. plan is within the range prescribed under the Employee
Retirement Income Security Act of 1974. Retirement benefits under the International plan are based
on years of service, final average earnings and social security benefits. Funding policies for the
International plan are based on local statutes and the assets are invested in guaranteed insurance
contracts.
Supplemental Executive Retirement Plans (SERP)
We have noncontributory, unfunded supplemental defined benefit retirement plans (“SERP”) for the
Chairman and Chief Executive Officer, Mr. Lawrence Saper, and certain former key officers. Life
insurance has been purchased to recover a portion of the net after tax cost for these SERPs. The
assumptions used to develop the supplemental pension cost and the actuarial present value of the
projected benefit obligation are reviewed annually.
Post-Retirement Medical Benefits Plan
In addition to the SERP, we have a noncontributory, unfunded post-retirement medical plan for Mr.
Saper. The post-retirement medical plan provides certain lifetime medical benefits to Mr. Saper and
his wife upon the termination of Mr. Saper’s employment with us.
14
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
9. Retirement Benefit Plans (Continued)
Net Periodic Benefit Costs
The components of net periodic benefit costs of our U.S. and International defined benefit pension
plans, the SERP and the post-retirement medical benefits plan include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
U.S. and International |
|
|
SERP |
|
Service cost |
|
$ |
2,176 |
|
|
$ |
1,978 |
|
|
$ |
282 |
|
|
$ |
262 |
|
Interest cost |
|
|
3,338 |
|
|
|
2,981 |
|
|
|
793 |
|
|
|
750 |
|
Expected return on assets |
|
|
(3,182 |
) |
|
|
(2,708 |
) |
|
|
— |
|
|
|
— |
|
Amortization of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
313 |
|
|
|
381 |
|
|
|
9 |
|
|
|
7 |
|
Unrecognized prior
service (credit) cost |
|
|
(31 |
) |
|
|
9 |
|
|
|
(72 |
) |
|
|
(56 |
) |
Curtailment loss |
|
|
— |
|
|
|
14 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit costs |
|
$ |
2,614 |
|
|
$ |
2,655 |
|
|
$ |
1,012 |
|
|
$ |
963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions |
|
$ |
7,700 |
|
|
$ |
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
Post-Retirement Medical |
|
Service cost |
|
$ |
— |
|
|
$ |
— |
|
Interest cost |
|
|
11 |
|
|
|
9 |
|
Expected return on assets |
|
|
— |
|
|
|
— |
|
Amortization of: |
|
|
|
|
|
|
|
|
Net loss |
|
|
2 |
|
|
|
1 |
|
Unrecognized prior service cost |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
Net periodic benefit costs |
|
$ |
16 |
|
|
$ |
13 |
|
|
|
|
|
|
|
|
15
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
9. Retirement Benefit Plans (Continued)
Net Periodic Benefit Costs (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
U.S. and International |
|
|
SERP |
|
Service cost |
|
$ |
725 |
|
|
$ |
722 |
|
|
$ |
94 |
|
|
$ |
87 |
|
Interest cost |
|
|
1,113 |
|
|
|
1,088 |
|
|
|
265 |
|
|
|
250 |
|
Expected return on assets |
|
|
(1,060 |
) |
|
|
(988 |
) |
|
|
— |
|
|
|
— |
|
Amortization of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
104 |
|
|
|
139 |
|
|
|
3 |
|
|
|
3 |
|
Unrecognized prior
service (credit) cost |
|
|
(11 |
) |
|
|
3 |
|
|
|
(24 |
) |
|
|
(19 |
) |
Curtailment loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit costs |
|
$ |
871 |
|
|
$ |
964 |
|
|
$ |
338 |
|
|
$ |
321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions |
|
$ |
5,200 |
|
|
$ |
3,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
Post-Retirement Medical |
|
Service cost |
|
$ |
— |
|
|
$ |
— |
|
Interest cost |
|
|
3 |
|
|
|
3 |
|
Expected return on assets |
|
|
— |
|
|
|
— |
|
Amortization of: |
|
|
|
|
|
|
|
|
Net loss |
|
|
1 |
|
|
|
1 |
|
Unrecognized prior service cost |
|
|
1 |
|
|
|
— |
|
|
|
|
|
|
|
|
Net periodic benefit costs |
|
$ |
5 |
|
|
$ |
4 |
|
|
|
|
|
|
|
|
16
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
10. Intangible Assets and Goodwill
Intangible Assets
The following is a summary of our intangible assets:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
Amortized intangible assets: |
|
|
|
|
|
|
|
|
Purchased technology |
|
$ |
19,087 |
|
|
$ |
22,176 |
|
Licenses |
|
|
2,887 |
|
|
|
5,272 |
|
Customer relationships and other |
|
|
— |
|
|
|
1,077 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
21,974 |
|
|
|
28,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization: |
|
|
|
|
|
|
|
|
Purchased technology |
|
|
(1,467 |
) |
|
|
(1,300 |
) |
Licenses |
|
|
(899 |
) |
|
|
(1,512 |
) |
Customer relationships and other |
|
|
— |
|
|
|
(12 |
) |
|
|
|
|
|
|
|
Subtotal |
|
|
(2,366 |
) |
|
|
(2,824 |
) |
|
|
|
|
|
|
|
Amortized intangible assets, net |
|
$ |
19,608 |
|
|
$ |
25,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
Trade name |
|
$ |
— |
|
|
$ |
373 |
|
|
|
|
|
|
|
|
The components of intangible assets represent the acquisition date fair value of purchased
technology for the ClearGlide® endoscopic vessel harvesting device, purchased technology for the
X-Site® suture-based vascular closure device and purchased technology for the ProLumen®
thrombectomy device.
Amortization expense was approximately $619 thousand and $428 thousand for the nine months ended
March 31, 2008 and 2007, respectively, and $214 thousand and $210 thousand for the three months
ended March 31, 2008 and 2007, respectively.
Expected future amortization expense for intangible assets subject to amortization for the
remainder of fiscal 2008 and the full fiscal years 2009 through 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending June 30, |
|
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
2012 |
Amortization expense |
|
$ |
221 |
|
|
$ |
884 |
|
|
$ |
990 |
|
|
$ |
1,094 |
|
|
$ |
1,200 |
|
The remaining weighted average amortization period for intangible assets is approximately 10.6
years.
Goodwill
As of March 31, 2008, we had $1.8 million of goodwill within the Interventional / Vascular Products
segment. There was no acquired goodwill and no change in the carrying value of existing goodwill
during the nine months ended March 31, 2008.
17
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
11. Commitments and Contingencies
Legal Proceedings
We are subject to certain legal actions, including product liability matters, arising in the
ordinary course of our business. We believe we have meritorious defenses in all material pending
lawsuits. We also believe that we maintain adequate insurance against any potential liability for
product liability litigation. In accordance with U.S. GAAP, we accrue for legal matters if it is
probable that a liability has been incurred and an amount is reasonably estimable.
As noted in our Form 10-K for the fiscal year ended June 30, 2007, on March 18, 2005, Johns Hopkins
University and Arrow International, Inc. filed a complaint in the United States District Court for
the District of Maryland, seeking a permanent injunction and damages for patent infringement. They
allege that our ProLumen Rotational Thrombectomy System infringes the claims of their U.S. patents
5,766,191 and 6,824,551. We have filed an answer denying such infringement and discovery has been
completed. On October 13, 2006, Johns Hopkins and Arrow filed a second complaint based upon their
newly issued U.S. patent 7,108,704 claiming our ProLumen device infringes the claims of this
patent. The parties had agreed that this matter should be consolidated with the first case and the
consolidation has taken place. A jury trial took place in late June 2007 resulting in a finding
that the ProLumen product infringed the three patents, a finding that we owed a $690 thousand
royalty to the plaintiffs and the issuance of an injunction precluding us from further selling the
ProLumen product. We filed a Notice of Appeal regarding the lower court’s decision and subsequently
filed an Appellate Brief on October 12, 2007. The appellees filed a response brief in November
2007. Oral argument took place on April 9, 2008 and we are awaiting the decision. We believe we
will be successful on appeal in overturning the lower court’s findings and, therefore, an accrual
for the royalty liability has not been recorded and no impairment of the assets related to ProLumen
has been taken.
On December 6, 2007, The General Hospital Corporation and Welch Allyn Protocol, Inc. filed an
action for patent infringement against us in the United States District Court for the District of
Massachusetts. In their complaint, the Plaintiffs allege that we have infringed and are infringing
upon U.S. Patent No. 5,319,363 (“‘363 Patent”). The Plaintiffs further allege in their complaint
that the infringing products include products and accessories marketed and/or sold by us under the
Panorama®, Passport®, Passport 2® and Spectrum® trade names and also alleges that other products
and accessories of ours may also infringe the ‘363 Patent. The complaint demands, among other
things, a preliminary and permanent injunction against us, damages and attorneys fees. After
discussion with us, the plaintiffs, The General Hospital Corporation and Welch Allyn Protocol,
Inc., dismissed the case without prejudice.
Credit Arrangements
We had available unsecured lines of credit at March 31, 2008 totaling $99.5 million, with interest
payable at LIBOR-based rates determined by the borrowing period. At March 31, 2008, we had no
outstanding borrowings. Of the total available, $25.0 million expires in October 2008 and $49.0
million expires in March 2009. These lines of credit are renewable annually at the option of the
banks, and we plan to seek renewal. We also have $25.5 million in credit lines with no expiration
date. We have approximately $1.0 million in letters of credit outstanding as security for inventory
purchases from an overseas vendor.
18
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
12. Dividends and Stock Repurchase Program
Dividends
The Board of Directors declared the following dividends:
|
|
|
|
|
|
|
|
|
|
|
Per Share |
|
|
|
|
|
|
Declaration Date |
|
Dividend |
|
Type |
|
Record Date |
|
Payment Date |
Fiscal 2008 |
|
|
|
|
|
|
|
|
February 27, 2008 |
|
$0.10 |
|
Regular |
|
March 10, 2008 |
|
March 26, 2008 |
|
January 9, 2008 |
|
$0.10 |
|
Regular |
|
January 22, 2008 |
|
February 8, 2008 |
|
September 21, 2007 |
|
$1.00 |
|
Special |
|
October 1, 2007 |
|
October 15, 2007 |
|
|
$0.10 |
|
Regular |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2007 |
|
|
|
|
|
|
|
|
February 26, 2007 |
|
$0.10 |
|
Regular |
|
March 7, 2007 |
|
April 2, 2007 |
|
December 13, 2006 |
|
$0.10 |
|
Regular |
|
December 27, 2006 |
|
January 16, 2007 |
|
September 13, 2006 |
|
$1.00 |
|
Special |
|
September 28, 2006 |
|
October 6, 2006 |
|
|
$0.07 |
|
Regular |
|
|
|
|
|
Stock Repurchases
In September 2006, the Board of Directors approved a stock repurchase program for $40 million of
our common stock. Purchases under this program may be made from time to time on the open market and
in privately negotiated transactions, and may be discontinued at any time at our discretion.
Repurchases of our common stock for the three and nine months ended March 31, 2008 and 2007 are
shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
Three Months Ended |
|
|
3/31/2008 |
|
3/31/2007 |
|
3/31/2008 |
|
3/31/2007 |
Shares of common stock repurchased |
|
|
46 |
|
|
|
56 |
|
|
|
46 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of common stock repurchased |
|
$ |
1,860 |
|
|
$ |
1,718 |
|
|
$ |
1,860 |
|
|
$ |
— |
|
19
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
13. Income Taxes
In the third quarter and first nine months of fiscal 2008, the consolidated effective tax rate for
continuing operations was 21.2% and 32.9%, respectively, compared to 30.5% and 25.5%, respectively,
in the third quarter and first nine months last year. The lower tax rate in the third quarter of
fiscal 2008 compared to the same period last year was primarily attributable to favorable tax
adjustments as a result of the expiration of federal and foreign statutes of limitations for fiscal
2004 and other tax benefits recognized due to the pending sale of
the PM business.
The higher tax rate in the first nine months of fiscal 2008 compared to the same period last year
was primarily attributable to the higher tax rate on the gain on sale of investment in the first
quarter of fiscal 2008, expiration of the extraterritorial income exclusion on December 31, 2006
and a shift in the geographical mix of earnings to higher taxed jurisdictions.
Adoption of New Accounting Standard
On July 1, 2007, we adopted the provisions of FIN 48. The impact of adopting FIN 48 on our
condensed consolidated balance sheet is summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
Balance at |
|
|
June 30, |
|
FIN 48 |
|
July 1, |
|
|
2007 |
|
Adjustment |
|
2007 |
Other assets |
|
$ |
34,897 |
|
|
$ |
239 |
|
|
$ |
35,136 |
|
Accrued expenses / income taxes payable |
|
|
17,661 |
|
|
|
(1,578 |
) |
|
|
16,083 |
|
Other liabilities |
|
|
25,220 |
|
|
|
4,632 |
|
|
|
29,852 |
|
Retained earnings |
|
|
294,765 |
|
|
|
(2,815 |
) |
|
|
291,950 |
|
The total amount of unrecognized tax benefits as of July 1, 2007 was $8.5 million, of which $4.7
million would impact our effective tax rate if recognized. In the third quarter of fiscal 2008, we
recognized approximately $1.5 million of previously unrecognized tax benefits primarily due to the
expiration of statutes of limitations. The recognition lowered our effective tax rates for the
third quarter and first nine months of fiscal 2008. We estimate that approximately $0.1 million of
the unrecognized tax benefits will be recognized within the next 12 months.
We recognize interest and penalties related to income tax matters in income tax expense. We had
approximately $0.8 million and $0.9 million accrued for interest and penalties as
of July 1, 2007 and March 31, 2008, respectively.
20
Datascope Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements — Continued
(Unaudited, in thousands except per share data)
13. Income Taxes (Continued)
Adoption of New Accounting Standard (Continued)
We operate within multiple taxing jurisdictions and are subject to routine corporate income tax
audits in many of those jurisdictions. These audits can involve complex issues, including
challenges regarding the timing and amount of deductions and credits and the allocation of income
among various tax jurisdictions. Our U.S. income tax returns for fiscal 1998 and prior years have
been audited by the Internal Revenue Service and are closed. The U.S. statutory period has expired
for fiscal years through 2004, and is open for subsequent periods. Currently, our tax returns are
being examined by the Internal Revenue Service for fiscal 2005 through 2007 and the State of New
Jersey for fiscal 2002 through 2006. For the remaining states, our fiscal 2004 through 2007 tax
returns remain open for examination by the tax authorities under a general four year statute of
limitations. Our foreign tax returns generally remain open for examination from fiscal 2005 through
2007 under a general three year statute of limitations.
14. Special Items
In fiscal 2007, we recorded special items totaling $12.8 million. These items consisted of the
following:
|
• |
|
Interventional Products Division exit plan totaling $5.0 million |
|
|
• |
|
Severance, settlement and other termination benefits of $6.0 million for workforce
reductions in the Patient Monitoring Division, the European sales organization, Corporate
and Genisphere |
|
|
• |
|
Goodwill impairment charge of $2.3 million related to Genisphere |
|
|
• |
|
Inquiry expenses of $1.7 million related to the Audit Committee investigations of
ethics line reports |
|
|
• |
|
Gain on sale of ProGuide assets totaling $2.2 million |
During the first nine months of fiscal 2008, severance and settlement payments of $3.1 million and
inquiry expenses of $0.1 million were paid reducing the remaining liability of $3.5 million at June
30, 2007 to $0.3 million at March 31, 2008. The remaining liability is included in accrued
compensation in our condensed consolidated balance sheet and is expected to be fully utilized by
the end of fiscal 2008.
15. Gain on Sale of Investment
We had a preferred stock investment of $5.0 million in Masimo Corporation, a supplier to our
Patient Monitoring business. On August 13, 2007, Masimo completed its initial public offering, and
concurrently, we sold substantially all of our investment in Masimo, resulting in a pretax gain on
the sale of approximately $13.2 million.
21
Datascope Corp. and Subsidiaries
|
|
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and
Results of Operations |
Business Overview
Datascope Corp. is a diversified medical device company that develops, manufactures and markets
proprietary products for clinical health care markets in interventional cardiology and
radiology, cardiovascular and vascular surgery, and critical care. We have three product lines
that are aggregated into two reportable segments, Cardiac Assist Products and Interventional /
Vascular Products. We have aggregated our product lines into two segments based on similar
manufacturing processes, economic characteristics, distribution channels, regulatory
environments and customers. Management evaluates the revenue and profitability performance of
each of our product lines to make operating and strategic decisions. The Cardiac Assist Products
segment accounted for 80% of total sales in fiscal 2007 and 81% in the first nine months of
fiscal 2008. Our products are sold worldwide by direct sales representatives and independent
distributors. Our largest geographic markets are the United States, Europe and Japan.
On March 10, 2008, we entered into a definitive agreement to sell our Patient Monitoring (“PM”)
business to Mindray Medical International Limited (“Mindray”). The sale of the PM business
allows us to focus our efforts on our high-margin, market-share leading cardiac assist business
and our high-margin vascular graft and peripheral stent businesses. We will receive
approximately $209 million in cash at the closing and
will retain approximately $31 million of receivables generated by the PM business. Closing
conditions have been satisfied and the transaction, which will be effective May 1, is expected
to close by mid-May.
We estimate that upon the closing and the collection of the PM receivables that we will retain,
the transaction will produce net cash proceeds of approximately $185 million after payments of
taxes and transaction-related expenses. Our Board of Directors is reviewing the use of the
proceeds received. The Board currently intends to return the proceeds to shareholders either
through the repurchase of its common stock, special dividends, or a combination to be determined
following the closing of the transaction.
Operating results of the PM business are reported as discontinued operations for all periods
presented. Assets and liabilities included in the transaction with Mindray are shown as “held
for sale” in the Consolidated Balance Sheet at March 31, 2008.
We believe that customers, primarily hospitals and other medical institutions, choose among
competing products on the basis of product performance, features, price and service. In general,
we believe price has become an important factor in hospital purchasing decisions because of
pressure to cut costs. These pressures on hospitals result from Federal and state regulations
that limit reimbursement for services provided to Medicare and Medicaid patients. There are also
cost containment pressures on healthcare systems outside the United States, particularly in
certain European countries. Many companies, some of which are substantially larger than us, are
engaged in manufacturing competing products. Our products are generally not affected by economic
cycles.
22
Our sales growth depends in part upon the successful development and marketing of new products.
We continue to invest in research and development. Our growth strategy includes selective
acquisitions or licensing of products and technologies from other companies.
In January 2007, we purchased a five-year license from the Sorin Group of Milan, Italy, for
exclusive worldwide distribution rights to Sorin’s peripheral vascular stent products, excluding
the United States and Japan. As part of that agreement, we received an option to purchase
Sorin’s worldwide peripheral vascular stent business within two years of the agreement date. We
estimate the worldwide market for peripheral vascular stents and percutaneous transluminal
angioplasty balloons, excluding the United States and Japan, to be $190 million annually.
In October 2007, we formed a new subsidiary, Datascope Japan K.K., to manage our Intra-Aortic
Balloon Pump (“IABP”) business in Japan since Edwards Lifesciences Ltd., our former distributor,
planned to exit that business in Japan at the end of December 2007. Datascope Japan K.K. was
formed to expand our overall business in Japan and will be responsible for import, product
service, sales support and product surveillance of the IABP business. USCI Holdings Ltd., one of
the premier medical device distribution organizations in Japan, will be responsible for sales
distribution throughout Japan. USCI will give us comprehensive sales coverage throughout Japan.
In January 2006, we acquired the ClearGlide® endoscopic vessel harvesting (“EVH”) product from
Ethicon, a Johnson & Johnson company. EVH devices enable less-invasive techniques for the
harvesting of suitable vessels for use in coronary artery bypass grafting. The vessel harvesting
product line was integrated into the Cardiac Assist business, which markets its products to
cardiac surgeons who perform coronary bypass graft surgery. We estimate the potential annual
market for EVH to be $220 million.
In October 2006, we announced a plan to exit the vascular closure market and phase out the
Interventional Products (“IP”) business. We have engaged an investment bank as financial advisor
for the sale of our vascular closure devices, VasoSeal®, On-Site™ and X-Site®. We plan to seek
the sale or independent distribution of our ProLumen® thrombectomy device for the interventional
radiology market; although these plans are subject to the reversal of a verdict that is being
appealed (see Legal Proceedings below for a discussion of litigation related to ProLumen). In
February 2007, we completed the sale of our ProGuide™ chronic dialysis catheter and the
associated assets for $3.0 million in cash proceeds plus a royalty on future sales of the
ProGuide catheter.
Our Safeguard™ assisted pressure device received FDA 510(k) clearance to claim reduced manual
compression time to stop bleeding following femoral arterial catheterization in diagnostic and
interventional procedures in March 2007. In May 2007 we tripled the Safeguard sales and
marketing effort in the United States from a pilot sales group to the entire Cardiac Assist
direct sales force. Safeguard is aimed at an estimated $125 million annual worldwide market.
We are committed to improving our operating margins through increasing the efficiency of our
manufacturing operations and cost containment programs.
Our financial position continued strong at the end of March 2008. Cash and marketable
investments were $63.0 million compared to $47.5 million at June 30, 2007.
23
Due to the pending sale of the PM business,
which is classified as discontinued operations, the below Results of Operations
relates to our continuing businesses, primarily Cardiac Assist and
InterVascular.
Results of Operations
Net Sales
Net sales increased 6% to $61.3 million in the third quarter and 4% to $170.8 million in the first
nine months of fiscal 2008 compared to the corresponding periods last year. Favorable foreign
exchange translation, as a result of the weaker United States dollar relative to the Euro and the
British Pound, increased sales by $1.4 million in the third quarter and $3.6 million in the first
nine months of fiscal 2008.
Sales in the United States were $27.1 million and $75.3 million in the third quarter and first nine
months of fiscal 2008, respectively, compared to $28.2 million and $83.2 million, respectively, for
the corresponding periods last year with the decrease primarily attributable to lower sales in the
Interventional / Vascular Products segment.
Sales in international markets increased 16% to $34.2 million in the third quarter and 18% to $95.5
million in the first nine months of fiscal 2008 compared to the corresponding periods last year,
due to increases in all businesses except Interventional Products and favorable foreign exchange
translation as noted above.
Sales of Cardiac Assist products in the third quarter of fiscal 2008 increased 6% to $49.2
million, primarily reflecting renewed significant sales growth of IABs in the United States (5%)
coupled with continued growth in international demand for IABs (up 18%). Sales of IABs grew in
all seven direct sales regions. As with the renewal of IAB sales growth in the European market,
we believe that renewed IAB sales growth in the United States stems from a reorganized and
expanded direct sales force that is focused on the clinical benefits of IAB use, and has led to
increasing use in cardiac catheterization and open-heart surgical procedures. Sales calls for
our Safeguard pressure-assist hemostasis device has also increased our presence in the cardiac
catheterization lab and given our sales representatives additional opportunities to promote the
use of IABs. Sales of the Safeguard device increased 11% over last year. Favorable foreign
currency translation contributed $0.8 million to cardiac assist sales in the third quarter.
Sales in Japan also increased. The combination of Datascope K.K., our new subsidiary in Japan
and our new distributor, USCI Holdings Ltd., has increased our market presence and will give us
faster access to the Japanese market. Datascope Japan K.K. is responsible for import, product
service, sales support and product surveillance of the IABP business. USCI Holdings Ltd., the
Company’s new exclusive distributor, is responsible for sales distribution throughout Japan.
In the first nine months of fiscal 2008, sales of Cardiac Assist products increased 5% to $138.1
million compared to $131.7 million last year due to the same reasons noted above.
Sales of the Interventional / Vascular Products segment were $11.8 million in the third quarter
of fiscal 2008 compared to $11.1 million last year and $31.7 million in the first nine months of
fiscal 2008 compared to $31.6 million last year.
24
Sales of Interventional Products in the third quarter of fiscal 2008 were $1.2 million, down
45% from $2.2 million last year as a result of the exit plan announced in October 2006.
Certain of our IP assets have been sold and we are in discussion to divest other IP assets.
We plan to seek the sale or independent distribution of our ProLumen thrombectomy device for
the interventional radiology market; although these plans are subject to the reversal of a
verdict in a pending appeal. Meanwhile, we continue to profitably service customer orders
for certain of our vascular closure products. In the first nine months of fiscal 2008, sales
of Interventional Products decreased 55% to $3.7 million compared to $8.3 million last year.
Sales of InterVascular products increased 19% year-over-year to $10.6 million due to the
continued growth of peripheral vascular stent products and a 15% increase in vascular graft
sales resulting from higher sales in certain international markets (22%), that more than
offset lower shipments to our U.S. distributor (24%), that is currently implementing an
inventory reduction plan. The reduction is expected to be completed in the first quarter of
fiscal 2009. Favorable foreign currency translation contributed $0.6 million to
InterVascular sales in the quarter.
In the first nine months of fiscal 2008, sales were $27.9 million, an increase of 20%
compared to $23.3 million last year primarily due to the same reasons noted above.
Sales of Genisphere products were $0.3 million in the third quarter and $1.0 million in the
first nine months of fiscal 2008 compared to $0.3 and $0.9 million, respectively, for the
corresponding periods last year.
Gross Profit (Net Sales Less Cost of Sales)
Gross profit increased $3.3 million, or 9%, in the third quarter and $4.7 million, or 4%, in the
first nine months of fiscal 2008, primarily as a result of increased sales of Cardiac Assist and
InterVascular Products, as discussed above.
Gross margin was 65.8% for the third quarter and 65.1% for the first nine months of fiscal 2008
compared to 64.1% and 64.8%, respectively, for the corresponding periods last year. The higher
gross margin in the third quarter and first nine months of fiscal 2008 compared to the same
periods last year was principally due to a higher margin in the Cardiac Assist Products segment
(2.7 points in the third quarter and 1.0 point in the first nine
month period) resulting from a more
favorable sales mix attributable to increased sales of higher margin
IABs and
Safeguard.
Research and Development Expense (R&D)
R&D expense includes new product development and improvements of existing products, as well as
expenses for regulatory filings and clinical evaluations. R&D expense was $6.0 million in the
third quarter of fiscal 2008, equivalent to 9.8% of sales, compared to $5.5 million, or 9.6% of
sales, for the same period last year. R&D expense was $16.9 million, equivalent to 9.9% of
sales, in the first nine months of fiscal 2008 compared to $17.2 million, or 10.5% of sales, for
the same period last year.
25
R&D expense for the Cardiac Assist Products segment was $3.0 million in the third quarter and
$8.8 million in the first nine months of fiscal 2008 compared to $2.9 million and $9.3 million,
respectively, in the corresponding periods last year. The increased R&D in the first nine months
of fiscal 2008 compared to the same period last year was primarily due to regulatory costs
incurred by our new wholly-owned subsidiary, Datascope Japan K.K. ($0.7 million).
R&D expense for the Interventional / Vascular Products segment was $1.6 million in the third
quarter and $4.8 million in the first nine months of fiscal 2008 compared to $1.6 million and
$5.6 million, respectively, in the corresponding periods last year. The decrease in R&D expense
for the first nine months of fiscal 2008 compared to the same period last year was primarily a
result of the IP exit plan ($1.6 million), partially offset by higher expenses in InterVascular
primarily for product validation costs ($0.8 million).
The balance of consolidated R&D is in Corporate and Other and amounted to $1.4 million in the
third quarter and $3.3 million in the first nine months of fiscal 2008 compared to $1.0 million
and $2.3 million, respectively, in the corresponding periods last year. Corporate and Other R&D
includes corporate design, technology, regulatory and Genisphere R&D expenses.
Selling, General & Administrative Expense (SG&A)
Total SG&A expense were $23.7 million, or 38.7% of sales, in the third quarter of fiscal 2008
compared to $22.7 million, or 39.2% of sales, last year. In the first nine months of fiscal
2008, SG&A expense increased 1% to $69.5 million, or 40.7% of sales, compared to $69.1 million,
or 42.1% of sales, for the same period last year.
SG&A expense for the Cardiac Assist Products segment increased $1.7 million, or 10%, to $18.9
million in the third quarter of fiscal 2008, primarily attributable to Datascope Japan K.K.
expenses ($0.9 million) and unfavorable foreign currency translation ($0.4 million). In the
first nine months of fiscal 2008, SG&A expense increased $5.8 million, or 12%, to $55.5 million
due to higher allocated corporate G&A charges ($3.5 million), Datascope Japan K.K. expenses
($1.0 million) and unfavorable foreign currency translation ($1.0 million). As a percentage of
segment sales, SG&A expenses were 38.4% in the third quarter and 40.2% in the first nine months
of fiscal 2008 compared to 37.2% and 37.7%, respectively, in the corresponding periods last
year.
SG&A expense for the Interventional / Vascular Products segment decreased $0.7 million, or 11%,
to $5.5 million in the third quarter of fiscal 2008, primarily attributable to the cost savings
from the IP exit plan ($0.4 million). In the first nine months of fiscal 2008, SG&A expense
decreased $4.3 million, or 21%, to $16.3 million due primarily to the same reason noted above.
As a percentage of segment sales, SG&A expenses were 47.1% in the third quarter and 51.5% in the
first nine months of fiscal 2008 compared to 55.4% and 65.0%, respectively, in the corresponding
periods last year.
Segment SG&A expense includes allocated corporate G&A charges.
26
Interest Income
Interest income of $0.6 million in the third quarter of fiscal 2008 was unchanged compared to
the same period last year. Interest income was $1.7 million in the first nine months of fiscal
2008 compared to $1.9 million last year with the decrease primarily attributable to a lower
average portfolio balance ($43.0 million vs. $53.3 million) and a decrease in the interest rate
yield to 4.2% from 4.6%.
Other, Net
Other, net increased $0.4 million in both the third quarter and first nine months of fiscal 2008
compared to the same periods last year attributable primarily to higher foreign exchange gains.
Gain on Sale of Investment
We had a preferred stock investment of $5.0 million in Masimo Corporation, a supplier to the
Patient Monitoring business. On August 13, 2007, Masimo completed its initial public offering,
and concurrently, we sold substantially all of our investment in Masimo, resulting in a pretax
gain on the sale of approximately $13.2 million in the first quarter of fiscal 2008.
Income Taxes
In the third quarter and first nine months of fiscal 2008, the consolidated effective tax rate
for continuing operations was 21.2% and 32.9%, respectively, compared to 30.5% and 25.5%,
respectively, in the third quarter and first nine months last year. The lower tax rate in the
third quarter of fiscal 2008 compared to the same period last year was primarily attributable to
favorable tax adjustments as a result of the expiration of federal and foreign statutes of
limitations for fiscal 2004 and other tax benefits recognized due to the pending sale of the PM
business.
The higher tax rate in the first nine months of fiscal 2008 compared to the same period last
year was primarily attributable to the higher tax rate on the gain on sale of investment in the
first quarter of fiscal 2008, expiration of the extraterritorial income exclusion on December
31, 2006 and a shift in the geographical mix of earnings to higher taxed jurisdictions. Our
effective tax rate could be impacted by changes in the geographic mix of our earnings.
Net Earnings from Continuing Operations
Net earnings from continuing operations were $9.0 million, or $0.58 per diluted share, in the
third quarter of fiscal 2008 compared to $7.0 million, or $0.45 per diluted share, last year.
Higher earnings in the third quarter of fiscal 2008 were primarily attributable to increased
earnings in the Cardiac Assist Products segment ($1.4 million) due to a higher gross margin
($3.1 million) from higher sales and the lower consolidated effective tax rate as discussed
above.
27
Net earnings from continuing operations were $26.5 million, or $1.71 per diluted share, in the
first nine months of fiscal 2008 compared to $13.1 million, or $0.85 per diluted share, last
year. Higher earnings in the first nine months of fiscal 2008 were primarily attributable to the
higher after-tax gain on sale of investment this year ($6.5 million), increased earnings in the
Cardiac Assist Products segment ($1.2 million) due to a higher gross margin ($5.6 million) from
higher sales and increased earnings in the Interventional / Vascular
Products segment ($7.4
million) as a result of the cost reductions implemented last year, partially offset by the
higher consolidated effective tax rate on continuing operations as discussed above.
Net Earnings from Discontinued Operations
Net earnings from discontinued operations
of the Patient Monitoring business were negligible in the
third quarter of fiscal 2008 compared to $0.9 million in the same period last year. Net earnings
from discontinued operations were $1.5 million in the first nine months of fiscal 2008 compared
to $2.7 million last year.
Net Earnings
Net earnings were $9.1 million, or $0.58 per diluted share, in the third quarter of fiscal 2008
compared to $7.9 million, or $0.51 per diluted share, last year. Higher earnings in the third
quarter of fiscal 2008 were primarily attributable to increased earnings in the Cardiac Assist
Products segment ($1.4 million) due to a higher gross margin ($3.1 million) from higher sales
and the lower consolidated effective tax rate on continuing operations as discussed above.
Net earnings were $28.0 million, or $1.80 per diluted share, in the first nine months of fiscal
2008 compared to $15.7 million, or $1.02 per diluted share, for
the same period last year. Higher earnings in the first nine months of fiscal 2008 were primarily attributable to the
higher after-tax gain on sale of investment this year ($6.5 million), increased earnings in the
Cardiac Assist Products segment ($1.2 million) due to a higher gross margin ($5.6 million) from
higher sales and increased earnings in the Interventional / Vascular
Products segment ($7.4
million) as a result of the cost reductions implemented last year, partially offset by the
higher consolidated effective tax rate on continuing operations as discussed above.
Liquidity and Capital Resources
We consider our cash and cash equivalents, short-term investments and our available unsecured
lines of credit to be our principal sources of liquidity.
Cash and cash equivalents and short-term investments at March 31, 2008 were $38.7 million
compared to $39.4 million at June 30, 2007. Long-term investments were $24.3 million at March
31, 2007 compared to $14.3 million at June 30, 2007. Working capital was $152.4 million compared
to $147.3 million at the end of fiscal 2007 and the current ratio was 3.4:1 compared to 3.5:1 at
June 30, 2007.
The increase in working capital was primarily due to an increase in inventories for the
continuing operations ($4.4 million) and prepaid expenses and other current assets ($3.6
million), offset by an increase in income taxes payable ($3.1 million). The lower current ratio
was primarily attributable to the increase in income taxes payable.
28
The increase in inventories was primarily attributable to increased cardiac assist inventory for
the EVH product and build-up for the new Sensation™ 7.0 Fr. Balloon and increased vascular
grafts inventory. The increase in prepaid expenses and other current assets was attributable to
a higher receivable for stock option proceeds due from our broker ($1.8 million) and purchase
advances for InterVascular ($1.0 million). The increase in income taxes payable was primarily
attributable to the higher earnings in the first nine months of fiscal 2008 compared to the same
period last year.
In the first nine months of fiscal 2008, we provided $25.5 million of net cash from operating
activities compared to $20.4 million last year with the increase primarily attributable to
increased earnings and an increase in income taxes payable ($5.1 million).
We used $4.4 million of net cash from investing activities in the first nine months of fiscal
2008. Net sales and maturities of investments yielded $65.5 million. These proceeds were spent
on $58.7 million of investment purchases, $5.5 million of capital expenditures and technology
and $5.7 million of capitalized software.
We used $16.1 million of net cash from financing activities in the first nine months of fiscal
2008. We paid $21.6 million in dividends, comprising three quarterly dividend payments of $0.10
per share and a special dividend of $1.00 per share, partially funded by $7.1 million of
proceeds from the exercise of stock options.
At March 31, 2008, we had available unsecured lines of credit totaling $99.5 million, with
interest payable at LIBOR-based rates determined by the borrowing period. Of the total
available, $25 million expires in October 2008 and $49.0 million expires in March 2009. These
lines of credit are renewable annually at the option of the banks, and we plan to seek renewal.
We also have $25.5 million in credit lines with no expiration date. We have approximately $1.0
million in letters of credit outstanding as security for inventory purchases from an overseas
vendor.
During the first nine months of fiscal 2008, we repurchased 46 thousand shares of our stock at a
cost of $1.9 million. We have a remaining balance of $1.1 million available under the stock
repurchase program authorized by the Board of Directors on May 16, 2001.
On September 12, 2006, the Board of Directors approved an additional stock repurchase program
for $40 million of our common stock. Purchases under this program may be made from time to time
on the open market or in privately negotiated transactions, and may be discontinued at any time
at our discretion.
On February 27, 2008, the Board of Directors declared a regular quarterly cash dividend of $0.10
per share, paid on March 26, 2008 to stockholders of record as of March 10, 2008.
We believe that our existing cash and investment balances, future cash generated from
operations, existing credit facilities and proceeds from the sale of the PM business will be
sufficient to meet our projected working capital, capital and investment needs. The moderate
rate of current United States and European inflation has not significantly affected us.
29
Information Concerning Forward Looking Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking statements as a result
of many important factors. Many of these risks cannot be predicted or quantified and are at
least partly outside our control. Additional risks include the Company’s dependence on certain
unaffiliated suppliers (including single source manufacturers) for cardiac assist and
interventional products, change in demand for the Company’s products, rapid and significant
changes that generally characterize the medical device industry and the ability to continue to
respond to such changes and the uncertain timing of regulatory approvals, as well as other risks
detailed in documents filed by Datascope with the Securities and Exchange Commission.
Critical Accounting Policies
Our financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires
us to make estimates and assumptions that affect the reported amount of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses for each period. We regularly evaluate our
estimates and assumptions on an on-going basis and adjust as necessary to accurately reflect
current conditions. These estimates and assumptions are based on current and historical
experience, on information from third party professionals and on various other factors that are
believed to be reasonable under the circumstances. Actual results could differ from those
estimates. Our critical accounting policies include Revenue Recognition, Allowance for Doubtful
Accounts, Inventory Valuation, Income Taxes and Pension Plan Actuarial Assumptions, as disclosed
in our Form 10-K for the fiscal year ended June 30, 2007.
Recent Accounting Pronouncements
On July 1, 2007, we adopted the provisions of the Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation
of Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes.
FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing that a benefit
cannot be recorded in the financial statements unless the tax position has a “more likely than
not” chance of being sustained upon audit based solely on the technical merits of the position.
Once the “more likely than not” standard is met, the benefit is measured by determining the
amount that is greater than 50 percent likely of being realized upon settlement, presuming that
the tax position is examined by the appropriate taxing authority that has full knowledge of all
relevant information. FIN 48 also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition. See Note 13 for
additional information related to the impact of adopting FIN 48.
30
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157
defines “fair value” as: the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. In
addition, SFAS 157 establishes a fair value hierarchy to be used to classify the source of
information used in fair value measurements, new disclosures of assets and liabilities measured
at fair value based on their level in the hierarchy and a modification of the long-standing
accounting presumption that the transaction price of an asset or liability equals its initial
fair value. SFAS 157 is effective in fiscal years beginning after November 15, 2007 (effective
for our fiscal year 2009 beginning July 1, 2008). The FASB issued Staff Position FAS 157-2,
Effective Date of FASB Statement No. 157, which delayed the provisions of SFAS 157 relating to
nonfinancial assets and liabilities until fiscal years beginning after November 15, 2008 (our
fiscal year 2010 beginning July 1, 2009). SFAS 157 is not expected to materially affect how we
determine fair value, but may result in certain additional disclosures.
In November 2006, the FASB issued Emerging Issues Task Force Issue No. 06-10, Accounting for
Deferred Compensation and Postretirement Benefits Aspects of Collateral Assignment Split-Dollar
Life Insurance Arrangements, which is effective for fiscal years that begin after December 15,
2007 (our fiscal year 2009 beginning July 1, 2008). The Task Force concluded that an employer
should recognize a liability for the postretirement benefit related to a collateral assignment
split-dollar life insurance arrangement in accordance with either FASB Statement No. 106,
Employers’ Accounting for Postretirement Benefits Other Than Pensions, or Accounting Principles
Board Opinion No. 12, Omnibus Opinion, based on the substantive agreement with the employee. The
Task Force also concluded that an employer should recognize and measure an asset based on the
nature and substance of the collateral assignment split-dollar life insurance arrangement. The
Supplemental Benefits Plan for the Chairman and Chief Executive Officer, Mr. Lawrence Saper,
provides survivor benefits in the form of a $10 million life insurance policy, maintained
pursuant to a collateral assignment split-dollar agreement among Mr. Saper, the Company and a
trust for the benefit of Mr. Saper’s family. The present value of the premium reimbursement
pursuant to the split-dollar agreement at March 31, 2008 is approximately $3.4 million. Upon
adoption, we will record a liability and a cumulative effect adjustment to retained earnings for
the present value of the premium reimbursement at the date of adoption.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities — Including an amendment of FASB Statement No. 115. This statement
provides an option to report selected financial assets and liabilities at fair value. In
addition, SFAS 159 establishes presentation and disclosure requirements for those assets and
liabilities which the registrant has chosen to measure at fair value. SFAS 159 is effective for
fiscal years beginning after November 15, 2007 (our fiscal year 2009 beginning July 1, 2008). We
are currently evaluating the impact of adopting SFAS 159 on our consolidated financial
statements.
31
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements — an amendment of ARB No. 51. This statement amends ARB 51 to establish
accounting and reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 clarifies a noncontrolling interest in a subsidiary is
an ownership interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. SFAS 160 is effective for fiscal years beginning on or after
December 15, 2008 (our fiscal year 2010 beginning July 1, 2009). We are currently evaluating the
impact of adopting SFAS 160 on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. This statement
establishes principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, the goodwill
acquired, and any noncontrolling interest in the acquiree. In addition, SFAS 141(R) establishes
disclosure requirements to enable the evaluation of the nature and financial effects of the
business combination. SFAS 141(R) applies prospectively to business combinations for which the
acquisition date is during fiscal years beginning on or after December 15, 2008, the effective
date of this statement. We will adopt SFAS 141(R) in the first quarter of our fiscal year 2010
beginning July 1, 2009.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Due to the global nature of our operations, we are subject to the exposures that arise from
foreign exchange rate fluctuations. Our objective in managing our exposure to foreign currency
fluctuations is to minimize net earnings volatility associated with foreign exchange rate
changes. We enter into foreign currency forward exchange contracts to hedge foreign currency
transactions which are primarily related to certain intercompany receivables denominated in
foreign currencies. Our hedging activities do not subject us to exchange rate risk because gains
and losses on these contracts offset losses and gains on the intercompany receivables hedged.
The net gains or losses on these foreign currency forward exchange contracts are included within
Other, net, in our condensed consolidated statements of earnings. We do not use derivative
financial instruments for trading purposes.
None of our foreign currency forward exchange contracts are designated as economic hedges of our
net investment in foreign subsidiaries. As a result, no foreign currency transaction gains or
losses were recorded in accumulated other comprehensive loss for the nine-month periods ended
March 31, 2008 and 2007.
As of March 31, 2008, we had a notional amount of $22.7 million of foreign exchange forward
contracts outstanding, denominated in Euros and British pounds. The foreign exchange forward
contracts generally have maturities that do not exceed 12 months and require us to exchange
foreign currencies for United States dollars at maturity, at rates agreed to when the contract
is signed.
32
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commission’s rules and
forms, and that such information is accumulated and communicated to the Disclosure Committee and
Company’s management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We carried out an evaluation, under the supervision and with the participation of management,
including the Company’s Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures as of the end of the period covered by
this report. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective.
During the quarter ended March 31, 2008, there were no changes in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
33
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to certain legal actions, including product liability matters, arising in the
ordinary course of our business. We believe we have meritorious defenses in all material pending
lawsuits. We also believe that we maintain adequate insurance against any potential liability
for product liability litigation. In accordance with generally accepted accounting principles we
accrue for legal matters if it is probable that a liability has been incurred and an amount is
reasonably estimable.
As noted in our Form 10-K for the fiscal year ended June 30, 2007, on March 18, 2005, Johns
Hopkins University and Arrow International, Inc. filed a complaint in the United States District
Court for the District of Maryland, seeking a permanent injunction and damages for patent
infringement. They allege that our ProLumen Rotational Thrombectomy System infringes the claims
of their U.S. patents 5,766,191 and 6,824,551. We have filed an answer denying such infringement
and discovery has been completed. On October 13, 2006, Johns Hopkins and Arrow filed a second
complaint based upon their newly issued U.S. patent 7,108,704 claiming our ProLumen device
infringes the claims of this patent. The parties had agreed that this matter should be
consolidated with the first case and the consolidation has taken place. A jury trial took place
in late June 2007 resulting in a finding that the ProLumen product infringed the three patents,
a finding that we owed a $690 thousand royalty to the plaintiffs and the issuance of an
injunction precluding us from further selling the ProLumen product. We filed a Notice of Appeal
regarding the lower court’s decision and subsequently filed an Appellate Brief on October 12,
2007. The appellees filed a Response Brief in November 2007. Oral argument took place on April
9, 2008 and we are awaiting the decision. We believe we will be successful on appeal in
overturning the lower court’s findings and, therefore, an accrual for the royalty liability has
not been recorded and no impairment of the assets related to ProLumen has been taken.
On December 6, 2007, The General Hospital Corporation and Welch Allyn Protocol, Inc. filed an
action for patent infringement against the Company in the United States District Court for the
District of Massachusetts. In their complaint, the Plaintiffs allege that the Company has
infringed and is infringing upon U.S. Patent No. 5,319,363 (“‘363 Patent”). The Plaintiffs
further allege in their complaint that the infringing products include products and accessories
marketed and/or sold by the Company under its Panorama, Passport, Passport 2 and Spectrum trade
names and also alleges that other products and accessories of the Company may also infringe the
‘363 Patent. The complaint demands, among other things, a preliminary and permanent injunction
against the Company, damages and attorneys fees. After discussion with the Company, the
plaintiffs, The General Hospital Corporation and Welch Allyn
Protocol, Inc., dismissed the case without prejudice.
34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth information on repurchases by the Company of its common stock
during the third quarter of fiscal year 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Shares |
|
|
|
Total |
|
|
|
|
|
|
Total Number of |
|
|
that May Yet Be |
|
|
|
Number of |
|
|
Average |
|
|
Shares Purchased as |
|
|
Purchased Under the |
|
|
|
Shares |
|
|
Price |
|
|
a Part of Publicly |
|
|
Programs |
|
Fiscal Period |
|
Purchased |
|
|
Per Share |
|
|
Announced Programs |
|
|
($000’s) |
|
01/01/08 - 01/31/08 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
42,963 |
|
02/01/08 - 02/29/08 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
42,963 |
|
03/01/08 - 03/31/08 |
|
|
46,600 |
|
|
$ |
39.914 |
|
|
|
46,600 |
|
|
$ |
41,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total third quarter |
|
|
46,600 |
|
|
$ |
39.914 |
|
|
|
46,600 |
|
|
$ |
41,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The current stock repurchase programs were announced on May 16, 2001 and September 12, 2006.
Approval was granted for up to $40 million in repurchases for each program and there are no
expiration dates on the current programs.
Item 6. Exhibits
|
10.1 |
|
Asset Purchase Agreement dated March 10, 2008 by and between Datascope Corp. and Mindray Medical International Limited (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on March 12, 2008 and incorporated herein by reference). |
|
|
31.1 |
|
Certification of Principal Executive Officer Regarding Facts and Circumstances Relating
to Quarterly Reports |
|
|
31.2 |
|
Certification of Principal Financial Officer Regarding Facts and Circumstances Relating
to Quarterly Reports |
|
|
32.1 |
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
35
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/ Henry M. Scaramelli
|
|
|
|
Henry M. Scaramelli |
|
|
|
Vice President, Finance and
Chief Financial Officer |
|
|
Dated: May 12, 2008