-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E9EvqSx2u879G+EA1IVaGzqk77rf96+eFZPhwSzArfjFZvzx51M5aQRNccyJ3i3p EYtnrFNk2wAACQmkjQA/UA== 0000950123-98-005159.txt : 19980518 0000950123-98-005159.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950123-98-005159 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATASCOPE CORP CENTRAL INDEX KEY: 0000027096 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 132529596 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06516 FILM NUMBER: 98624209 BUSINESS ADDRESS: STREET 1: 14 PHILLIPS PKWY CITY: MONTVALE STATE: NJ ZIP: 07645-9998 BUSINESS PHONE: 2013918100 MAIL ADDRESS: STREET 1: 14 PHILIPS PARKWAY CITY: MONTVALE STATE: NJ ZIP: 07645 10-Q 1 DATASCOPE CORP. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /x/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to __________________ Commission File Number 0-6516 DATASCOPE CORP. (Exact name of registrant as specified in its charter) Delaware 13-2529596 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 14 Philips Parkway, Montvale, New Jersey 07645-9998 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 391-8100 Former name, former address and former fiscal year, if changed since last report: Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO____ Number of Shares of Company's Common Stock outstanding as of April 30, 1998: 15,577,121. Page 1 2 DATASCOPE CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Third quarter and first nine months fiscal 1998 compared to the corresponding periods last year. NET SALES Net sales of $60.3 million in the third quarter and $177.3 million in the first nine months of fiscal 1998 increased 4% and 9%, respectively, led by the continued U.S. sales growth of VasoSeal(R) and higher sales of patient monitoring products and vascular grafts. Sales of cardiac assist products were essentially unchanged from last year reflecting the continued highly competitive climate that has characterized the intra-aortic balloon pumping market for the past two years. While competition is expected to continue, the Company believes its competitive position will gain as a result of the new System 97e, which began shipping in the second quarter, and the new Profile 8 Fr. Co-Lumen (CL) balloon catheter that the Company believes offers significant advantages over competitive products. The new Profile 8 Fr. Catheter has the smallest profile of any intra-aortic balloon catheter and is the first capable of insertion through an 8 Fr. sheath, a standard sheath size used for coronary angioplasty and stent procedures. The 510(k) submission for the Profile 8 Fr. Catheter was approved by the FDA in early May 1998 and the Company believes that the introduction of this product in the U.S. market will contribute to improvements in sales and margins of the Cardiac Assist division. Sales of VasoSeal in the U.S. rose to $7.2 million in the third quarter, a 50% increase and a 13% increase over the sequential quarter. The Company continues to expand the VasoSeal direct selling organization in the U.S. to meet growing demand and increased competition for vascular sealing devices and is establishing a direct sales effort in Europe. Sales of patient monitoring products increased modestly in the third quarter as initial shipments of new products, including the Expert(TM) high-end patient monitoring system more than offset lower sales of older monitors. The Patient Monitoring division has introduced several new products including the Expert, the Accutorr(R) Plus non-invasive blood pressure monitors, an enhanced Passport(R) XG portable monitor and the new MRI(TM) monitor. These new products have broadened and improved the product line and are expected to contribute to stronger growth in the patient monitoring business beginning in the fourth quarter. Page 2 3 Sales of InterVascular, Inc. increased for the third consecutive quarter reflecting shipments to the Company's U.S. distributor of InterGard(TM) collagen coated vascular grafts. InterVascular has expanded its production capacity to meet increased orders for the U.S. market. The foreign exchange rate effect of the stronger U.S. dollar compared to major European currencies decreased total sales by approximately $600 thousand and $2.2 million in the third quarter and first nine months of fiscal 1998, respectively. GROSS PROFIT (NET SALES LESS COST OF SALES) The gross profit percentage was 66.1% and 64.9% for the third quarter and first nine months of fiscal 1998, respectively, compared to 64.6% and 65.0% for the comparable periods last year. The increase in the gross profit percentage in the third quarter of fiscal 1998 was primarily attributable to manufacturing efficiencies and higher selling prices for the VasoSeal device and cost reductions in the Patient Monitoring division, partially offset by lower selling prices for cardiac assist products. RESEARCH AND DEVELOPMENT (R&D) R&D expenses, as a percentage of sales, amounted to 12.3% and 12.8% in the third quarter and first nine months of fiscal 1998, respectively, compared to 10.7% and 12.3% for the same periods last year. R&D expenses increased $1.2 million or 20% and $2.7 million or 13% in the third quarter and first nine months of fiscal 1998, respectively, primarily attributable to new product development activity in essentially all businesses. SELLING, GENERAL & ADMINISTRATIVE EXPENSES (SG&A) SG&A expenses, as a percentage of sales, were 41.2% and 42.4% in the third quarter and first nine months of fiscal 1998, respectively, compared to 41.7% and 43.5%, for the same periods last year, as expenses increased at a lower rate than sales increases. SG&A expenses increased $0.7 million or 3% in the third quarter and $4.1 million or 6% in the first nine months of fiscal 1998, as a result of the continuing buildup of the U.S. and international VasoSeal field selling organization, new marketing programs in the Cardiac Assist division and higher business development expenses. The stronger U.S. dollar compared to major European currencies decreased SG&A expenses by approximately $425 thousand and $1.6 million in the third quarter and first nine months of fiscal 1998, respectively. Page 3 4 SETTLEMENTS OF LITIGATION Net earnings in the first nine months of fiscal 1997 included the settlement expense for two lawsuits recorded in the first quarter: 1) The shareholder class action securities lawsuit filed in November 1993 against the Company. The cost of the settlement including legal fees was $5.6 million, $3.3 million after tax or $0.20 per diluted share. 2) The patent infringement lawsuit filed in February 1996 by Quinton Instruments Company and Sherwood Medical Company concerning the VasoSeal Vascular Hemostasis Device. The settlement of this lawsuit allows all parties to market their respective vascular hemostasis products and includes covenants against future litigation. The cost of the settlement including legal fees was $3.0 million, $1.8 million after tax or $0.11 per diluted share. INTEREST INCOME AND EXPENSE The higher interest income in the third quarter and first nine months of fiscal 1998 was primarily attributable to an increase in the investment portfolio, as cash generated from operations was invested in marketable securities. OTHER INCOME AND EXPENSE The Company enters into foreign exchange forward contracts to hedge a major portion of its foreign currency exposures, primarily related to certain receivables denominated in foreign currencies. The hedging has reduced the Company's exposure to fluctuations in foreign currencies. The net foreign exchange transaction gain or loss is reported in other income and expense. Foreign exchange forward contracts outstanding at March 31, 1998 totaled $0.2 million, all of which were in European currencies, with maturities that do not exceed 12 months. NET EARNINGS Net earnings in the third quarter of fiscal 1998 improved to $6.2 million or $0.38 per diluted share compared to $5.75 million, or $0.35 per diluted share. The earnings increase resulted primarily from higher sales of the VasoSeal device, improved gross profit margins and slightly higher interest income earned on investments. Net earnings for the first nine months of fiscal 1998 were $14.5 million or $0.88 per diluted share compared to $12.6 million or $0.77 per diluted share for the first nine months last year, excluding the special charge for settlement of litigation of $5.1 million after tax or $0.31 per diluted share reported in the first quarter of fiscal 1997. The improved earnings resulted primarily from higher U.S. sales of the VasoSeal device and patient monitoring products, and increased interest income earned on investments. Page 4 5 LIQUIDITY AND CAPITAL RESOURCES The Company maintained its strong financial position during the first nine months of fiscal 1998. Working capital was $111.9 million at March 31, 1998 compared to $123.7 million at June 30, 1997, with the reduction primarily attributable to cash used for the stock repurchase program ($14.0M) and more funds ($9.3 million) being invested long-term. Cash provided by operating activities was $17.8 million in the first nine months of fiscal 1998 compared to $2.9 million in the same period last year. The increase in cash was primarily attributable to improved management of inventory and the increase in net earnings in the first nine months of fiscal 1998. The first nine months of fiscal 1997 included a $5.1 million disbursement for settlements of litigation. In the first nine months of fiscal 1998, cash was used to purchase $5.3 million of plant and equipment and $9.3 million in long-term marketable securities, with maturities up to 4 years. Short-term investments were reduced $11.5 million for cash used for the stock repurchase program. On May 3, 1996 the Company announced a common stock repurchase program of up to $20 million, subject to market conditions and other relevant factors affecting the Company. During the first nine months of fiscal 1998, 570,100 shares of the Company's stock were repurchased at a cost of $13,971,000. Since inception of the stock repurchase program, the Company has repurchased 793,400 shares of stock at a cost of $18,122,000 as of March 31, 1998. Management believes that the Company's financial resources are sufficient to meet its projected cash requirements including the expenditures expected under the stock repurchase program. The moderate rate of current U.S. inflation has not significantly affected the Company. ADOPTION OF NEW ACCOUNTING STANDARD The Company adopted Financial Accounting Standard No. 128, "Earnings Per Share," as required effective December 31, 1997. All prior earnings per share amounts presented have been restated to conform with this new statement. Page 5 6 INFORMATION CONCERNING FORWARD LOOKING STATEMENTS This management's discussion and analysis of results of operations and financial condition contains forward-looking statements that involve risks and uncertainties because of the possibility that market conditions may change, particularly as the result of competitive activity in the cardiac assist, vascular sealing device and other markets served by the Company, the ability of the Company to successfully introduce and gain market acceptance for new products, continued demand for the Company's products generally, the rapid and significant changes that characterize the medical device industry and the ability to continue to respond to such technological changes, and because the timing of regulatory approvals is uncertain, as well as other risks detailed from time to time in documents filed by Datascope with the Securities and Exchange Commission. Page 6 7 DATASCOPE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
MARCH 31, JUNE 30, 1998 1997 --------- --------- ASSETS (unaudited) (a) Current Assets: Cash and cash equivalents $ 3,851 $ 2,597 Short-term investments 45,846 57,338 Accounts receivable, less allowance for doubtful accounts of $1,062 and $922 50,726 52,240 Inventories (Note 2) 35,290 34,604 Prepaid expenses and other current assets 10,505 9,485 --------- --------- Total Current Assets 146,218 156,264 Property, Plant and Equipment, net of accumulated depreciation of $44,838 and $42,079 47,671 44,742 Non-Current Marketable Securities 35,170 25,902 Other Assets 12,171 10,954 --------- --------- $ 241,230 $ 237,862 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 9,729 $ 6,650 Accrued expenses 13,494 15,755 Accrued compensation 7,776 9,336 Taxes on income 3,346 807 --------- --------- Total Current Liabilities 34,345 32,548 Other Liabilities 14,082 13,071 Stockholders' Equity (Note 4) Preferred stock, par value $1.00 per share: Authorized 5,000,000 shares; Issued, none -- -- Common stock, par value $.01 per share: Authorized, 45,000,000 shares; Issued and outstanding, 16,349,186 and 16,245,732 shares 163 162 Additional paid-in capital 45,931 44,266 Treasury stock at cost, 793,400 and 223,300 shares (18,122) (4,151) Retained earnings 170,389 155,868 Cumulative translation adjustments (5,558) (3,902) --------- --------- 192,803 192,243 --------- --------- $ 241,230 $ 237,862 ========= =========
(a) Derived from audited financial statements See notes to consolidated financial statements Page 7 8 DATASCOPE CORP. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (Unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED MARCH 31, MARCH 31, -------------------------- -------------------------- 1998 1997 1998 1997 --------- --------- --------- --------- NET SALES $ 177,300 $ 163,100 $ 60,300 $ 57,900 --------- --------- --------- --------- Costs and Expenses: Cost of sales 62,272 57,118 20,458 20,502 Research and development expenses 22,775 20,119 7,399 6,180 Selling, general and administrative expenses 75,120 71,017 24,851 24,139 Litigation settlement expense (Note 3) -- 8,554 -- -- --------- --------- --------- --------- 160,167 156,808 52,708 50,821 --------- --------- --------- --------- OPERATING EARNINGS (LOSS) 17,133 6,292 7,592 7,079 Other (Income) Expense: Interest income (3,796) (3,568) (1,235) (1,119) Interest expense 18 14 5 6 Other, net 120 488 83 209 --------- --------- --------- --------- (3,658) (3,066) (1,147) (904) --------- --------- --------- --------- EARNINGS BEFORE TAXES ON INCOME 20,791 9,358 8,739 7,983 Taxes on Income 6,270 1,855 2,534 2,233 --------- --------- --------- --------- NET EARNINGS $ 14,521 $ 7,503 $ 6,205 $ 5,750 ========= ========= ========= ========= Earnings Per Share, Basic (Note 4) $ 0.91 $ 0.47 $ 0.39 $ 0.36 ========= ========= ========= ========= Weighted Average Number of Common and Common Equivalent Shares Outstanding, Basic 15,924 16,057 15,762 16,085 ========= ========= ========= ========= Earnings Per Share, Diluted (Note 4) $ 0.88 $ 0.46 $ 0.38 $ 0.35 ========= ========= ========= ========= Weighted Average Number of Common and Common Equivalent Shares Outstanding, Diluted 16,445 16,347 16,323 16,542 ========= ========= ========= =========
See notes to consolidated financial statements Page 8 9 DATASCOPE CORP. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (DOLLARS IN THOUSANDS) (Unaudited)
NINE MONTHS ENDED MARCH 31, ------------------------ 1998 1997 -------- -------- OPERATING ACTIVITIES: Net cash provided by operating activities $ 17,789 $ 2,854 -------- -------- INVESTING ACTIVITIES: Capital expenditures (5,322) (3,783) Purchases of marketable securities (61,416) (71,234) Maturities of marketable securities 63,640 73,706 -------- -------- Net cash used in investing activities (3,098) (1,311) -------- -------- FINANCING ACTIVITIES: Treasury shares acquired under repurchase program (13,971) (1,992) Exercise of stock options, net 1,433 1,448 -------- -------- Net cash used in financing activities (12,538) (544) -------- -------- Effect of exchange rates on cash (899) (530) -------- -------- Increase in cash and cash equivalents 1,254 469 Cash and cash equivalents, beginning of period 2,597 2,574 -------- -------- Cash and cash equivalents, end of period $ 3,851 $ 3,043 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION Cash paid (refunded) during the period for: Income taxes $ 3,263 $ (21) -------- -------- Non-cash transactions: Net transfers of inventory to fixed assets for use as demonstration equipment $ 4,974 $ 4,534 -------- --------
See notes to consolidated financial statements Page 9 10 DATASCOPE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The consolidated balance sheets as of March 31, 1998 and 1997 and the statements of consolidated earnings and cash flows for the three and nine month periods ended March 31, 1998 and 1997 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) have been made that are necessary to present fairly the financial position, results of operations and cash flows for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that the condensed consolidated financial statements included herein be read in conjunction with the financial statements and notes included in the Company's June 30, 1997 annual report to shareholders. The results of operations for the period ended March 31, 1998 are not necessarily indicative of a full year's operations. The presentation of certain prior year information has been reclassified to conform with the current year presentation. 2. INVENTORIES Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or market.
(In thousands) ----------------------- March 31, June 30, 1998 1997 ------- ------- Materials $12,464 $10,917 Work in Process 6,507 4,885 Finished Goods 16,319 18,802 ------- ------- $35,290 $34,604 ======= =======
3. SETTLEMENTS OF LITIGATION The Company settled litigation during the first quarter of fiscal 1997 resulting in the following charges against first quarter earnings: $5,550,000 before taxes, $3,291,000 after income tax, equivalent to $0.20 per share to settle the shareholder class action securities lawsuit, including related legal fees. $3,004,000 before taxes, $1,807,000 after income tax, equivalent to $0.11 per share to settle the patent infringement lawsuit filed by Quinton Instruments Company and Sherwood Medical Company concerning the VasoSeal Vascular Hemostasis Device, including related legal fees. The settlement allows all parties to market their respective vascular hemostasis products and includes covenants against future litigation. Page 10 11 DATASCOPE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY The Company adopted Financial Accounting Standard No. 128, "Earnings Per Share", as required effective December 31, 1997. All prior earnings per share amounts presented have been restated to conform with this new statement. The reconciliation of Basic Earnings Per Share to Diluted Earnings Per Share is as follows:
- ---------------------------- ----------------------------------- --------------------------------- For Three Months Ended March 31, 1998 March 31, 1997 - ---------------------------- ----------------------------------- --------------------------------- Net Per Share Net Per Share Basic EPS Earnings Shares Amount Earnings Shares Amount - --------- ------ ------ ----- ------ ------ ----- Earnings available to common shareholders $6,205 15,762 $0.39 $5,750 16,085 $0.36 Diluted EPS Options issued to employees -- 561 -- -- 457 -- ------ ------ ----- ------ ------ ----- Earnings available to common shareholders plus assumed conversions $6,205 16,323 $0.38 $5,750 16,542 $0.35 ====== ====== ===== ====== ====== =====
- ----------------------------- ----------------------------------- ------------------------------------ For Nine Months Ended March 31, 1998 March 31, 1997 - ----------------------------- ----------------------------------- ------------------------------------ Net Per Share Net Per Share Basic EPS Earnings Shares Amount Earnings Shares Amount - --------- ------- ------- ----- ------- ------- ----- Earnings available to common shareholders $14,521 15,924 $0.91 $ 7,503 16,057 $0.47 Diluted EPS Options issued to employees -- 521 -- -- 290 -- ------- ------- ----- ------- ------- ----- Earnings available to common shareholders plus assumed conversions $14,521 16,445 $0.88 $ 7,503 16,347 $0.46 ======= ======= ===== ======= ======= =====
Changes in the components of stockholders' equity for the nine months ended March 31, 1998 were as follows:
(In thousands) -------- Net income $ 14,521 Translation adjustments (1,656) Common stock and additional paid-in capital effects of stock option activity 1,666 Purchases under stock repurchase plan (13,971) -------- Total increase in stockholders' equity $ 560 ========
Page 11 12 Part II: Item 6. Exhibits and Reports on Form 8-K a. Exhibits None b. Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. Page 12 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. DATASCOPE CORP. Registrant By: /s/Lawrence Saper Lawrence Saper Chairman of the Board and Chief Executive Officer By: /s/Murray Pitkowsky Murray Pitkowsky Senior Vice President and Secretary Dated: May 11, 1998 Page 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED EARNINGS. 9-MOS JUN-30-1998 JUL-01-1997 MAR-31-1998 3,851 45,846 51,788 (1,062) 35,290 146,218 92,509 (44,838) 241,230 34,345 0 0 0 163 192,640 241,230 177,300 177,300 62,272 62,272 0 0 18 20,791 6,270 14,521 0 0 0 14,521 0.91 0.88 E.P.S. on this line is BASIC, not PRIMARY.
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