-----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, LfdM4WH7xhoX6fuFdAmwULcYSnYNVLnhX+oNCiaQdnLXW1IGbJ8hWrowUSlTLMHp xjq5eqOFLjsj7XGFgd/DOg== 0000912057-96-017591.txt : 19960814 0000912057-96-017591.hdr.sgml : 19960814 ACCESSION NUMBER: 0000912057-96-017591 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPI INC CENTRAL INDEX KEY: 0000317032 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 411310335 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09387 FILM NUMBER: 96611436 BUSINESS ADDRESS: STREET 1: 1275 GREY FOX RD CITY: ST PAUL STATE: MN ZIP: 55112-6989 BUSINESS PHONE: 6126366600 MAIL ADDRESS: STREET 2: 1275 GREY FOX ROAD CITY: ST PAUL STATE: MN ZIP: 55112-6989 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1996 --------------------------- Commission File Number 0-9387 --------------------------- Empi, Inc. --------------------------- (Exact name of registrant as specified in its charter) Minnesota 41-1310335 - -------------------------------- -------------------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 5255 East River Road Minneapolis, Minnesota 55421 - -------------------------------- -------------------------------- (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code (612) 586-7300 --------------------------- 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 / / 8,482,917 shares of Common Stock were outstanding as of August 7, 1996. 1 PART I - - FINANCIAL INFORMATION Item 1. CONSOLIDATED FINANCIAL STATEMENTS The response to Part I, Item 1 is submitted as a separate section of this report. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS REVENUE Empi, Inc.'s (the "Company") total revenues for the 1996 second quarter equaled $16.9 million compared to $16.3 million for the second quarter of 1995, an increase of 4 percent. Total revenues for the first six months of 1996 were $33.8 million, a 3 percent increase over the same period revenues of $32.8 million for 1995. Comparatively, overall revenues for the second quarter and the first six months of 1996 have been adversely impacted due to strategic actions to improve the Company's net income by transitioning from a multiple wholesale/dealer customer base to master distributor systems within the United States and Canada. Revenue from the Company's core rehabilitation products of TENS (Transcutaneous Electrical Nerve Stimulation) devices, NMES (Neuromuscular Electrical Stimulation) devices, and related accessories increased 6 percent and 2 percent for the second quarter and the first six months, respectively. Revenue from the Company's non core products of Dupel-Registered Trademark- non invasive drug delivery system, Advance Dynamic ROM-Registered Trademark- orthosis, Pronex-Registered Trademark- pneumatic device to manage cervical pain, Innova PFS-Registered Trademark- (Pelvic Floor Stimulator), sEMG (surface Electromyography Biofeedback), and other miscellaneous products for 1996 decreased by 1 percent for the second quarter and ended the first six months with a 4 percent increase over 1995. Results, within non core products, for the second quarter were mixed. Pronex revenues and Innova revenues were up, Dupel revenues were flat, and Advance ROM revenues were down, from second quarter 1995. Revenues for both the Innova and the Advance ROM product lines fell well below expectations. Each of those product lines have been adversely impacted by unfavorable Medicare reimbursement decisions this year; Advance being granted only rental status while Innova PFS failed to receive a favorable coverage policy decision. The Company plans to continue its dialogue with HCFA (Health Care Financing Administration) regarding improved coverage. International sales were 5 percent of total revenue dollars for both the second quarter and the first six months of 1996 compared to 5 percent and 7 percent for the same periods in 1995. GROSS MARGIN Gross margin for the 1996 second quarter was $12.5 million compared to $12.1 million for second quarter 1995. Stated as a percent of revenue second quarter gross margin was 74 percent for both 1996 and 1995, respectively. Gross margin for the first six months was $25.0 million and $24.1 million for 1996 and 1995, respectively. Gross margin percentages for the first six months of 1996 and 1995 were 74 percent and 73 percent. respectively. Manufacturing costs, as a percent of revenue, have remained flat. 1996 inflationary costs (payroll and materials) have been offset by lower inventory provisions and production efficiencies. The Company anticipates the gross margin percentage to remain near its current level unless there is a major change in revenue. 2 SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses for the second quarter and the first six months of 1996 were $8.3 million and $16.9 million, respectively, compared to $8.2 million and $16.7 million for the same periods of 1995. Stated as a percent of revenue, Selling, general and administrative expenses were 49 percent and 50 percent for the second quarter of 1996 and 1995, respectively and were 50 percent and 51 percent for the first six months of 1996 and 1995, respectively. Selling, general and administrative expenses for 1996 remain under tight management control and were relatively flat after adjusting for a one time charge during the second quarter for severance costs associated with an organizational change. RESEARCH AND DEVELOPMENT Research and development expenses were $.9 million and $1.7 million for the second quarter and the first six months, respectively, for both 1996 and 1995. Stated as a percent of revenue, research and development expenses have been averaging a steady 5 percent in the second quarter and the first six months for both 1996 and 1995. Research and development efforts for 1996 have been focused on developing next generation products and continuation engineering. OTHER INCOME / EXPENSE Interest income for the second quarter and the first six months of 1996 was $221,000 and $522,000, respectively. Interest income for the same periods in 1995 was $179,000 and $339,000. The increase in interest income in 1996, compared to 1995 is being driven by the Company's improved cash position and investment activities. Interest expense for the second quarter and the first six months was $21,000 and $42,000, respectively. Interest expense for the same periods in 1995 was $32,000 and $60,000. The major driver impacting interest expense is an interest-bearing note which was issued to finance the Company's acquisition of the Nortech Division of Medtronic, Inc. in 1992. The Company also realized a gain of $33,000 in the second quarter of 1996 due to the disposal of an investment in common stock warrants and other income in excess of $200,000 from a trade dress settlement recorded in the first quarter of 1996. NET INCOME Net income for the second quarter of 1996 was $2.2 million compared to $1.9 million in the second quarter of 1995. Net income for the first six months of 1996 and 1995 was $4.4 million and $3.6 million, respectively. The 21 percent improvement in net income for the first six months of 1996 can be attributed to four factors: (1) higher sales, (2) tight spending controls, (3) higher interest income, and (4) other miscellaneous income items detailed above. LIQUIDITY AND CAPITAL REQUIREMENTS The Company's cash, cash equivalents, and short term investments for the quarter ended June 30, 1996 was approximately $20.5 million, an increase of $1.5 million from the year ended December 31, 1995. Due to the Company's strong cash position, the Board approved a $4.0 million stock buy back program in 1995 and in the first quarter of 1996 authorized the use of an additional $4.0 million to buy back and retire shares throughout 1996. On August 6, 1996, Empi announced the Board had approved an additional $6.0 million stock buy back program. Some of the shares repurchased under the program will be used to cover stock issuances in connection with the company's stock option and stock purchase plans. The Company also canceled a $7.0 million line of credit in 1995. During 1995 the Company bought back and retired 62,000 shares of common stock at a total cost of $1.2 million. During the first six months of 1996, the Company bought back and retired an additional 489,000 warrants and shares of common stock at a total cost of $5.6 million. The Company's working capital at the end of the second quarter 1996 was approximately $44.6 million, an increase of $1.6 million from the year ended December 31, 1995. The current ratio and the quick ratio at June 30, 1996 were 9.9 to 1 and 7.2 to 1, respectively. 3 The Company believes its cash, cash equivalents and short term investments, together with cash flow from operations, will be sufficient to meet its working capital needs for the immediate and foreseeable future. Any forward-looking statements contained in this Management's Discussion and Analysis section should be read in conjunction with the "cautionary statements" contained in Part 1 of the Company's Form 10-K for year ended December 31, 1995. 4 PART II - - OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Shareholders on Monday, May 6, 1996. Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. There was no solicitation in opposition to management's nominees as listed in the Company's Proxy Statement, and all nominees were elected. By a vote of 7,511,780 shares in favor, with 50,538 shares opposed and 59,799 shares abstaining, the shareholders set the number of directors to be elected at seven (7). The following persons were elected as Class One Directors of the Company with terms expiring in 1999, by the votes indicated: NOMINEE NUMBER OF VOTES FOR NUMBER OF VOTES WITHHELD Donald M. Maurer 7,544,582 77,535 Dr. Kenneth F. Tempero 7,539,782 82,335 By a vote of 7,261,011 shares in favor, with 189,046 shares opposed and 68,585 shares abstaining, not including 97,475 shares represented by broker non-votes, the shareholders approved the Company's 1997 Employee Stock Purchase Plan. The Plan covers five years beginning January 1, 1997 and ending December 31, 2001. The Plan will operate in five phases, consisting of 12 months each phase, and calls for the Company to reserve 300,000 shares of the Company's common stock for issuance throughout the duration of the Plan. Item 5. OTHER INFORMATION None. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ------------- ------------- (11) Statement re: computation of per share earnings (27) Financial Data Schedule (filed only in electronic format) (b) No report on Form 8-K has been filed during the quarter ended June 30, 1996. 5 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 thereto duly authorized. Empi, Inc. August 08, 1996 By /s/ Joseph E. Laptewicz --------------------------------------------- Joseph E. Laptewicz President and Chief Executive Officer (Principal Executive Officer) August 08, 1996 By /s/ Timothy E. Briggs --------------------------------------------- Timothy E. Briggs Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 6 QUARTERLY REPORT ON FORM 10 - Q PART I - ITEM 1 LIST OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 1996 EMPI, INC. MINNEAPOLIS, MINNESOTA 7 FORM 10 - Q - - PART I - ITEM 1 EMPI, INC. LIST OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following condensed consolidated financial statements of Empi, Inc. are included in Part I - Item 1. Condensed Consolidated Balance Sheets - - June 30, 1996 and December 31, 1995, Condensed Consolidated Statements of Operations - - Three and Six months ended June 30, 1996 and 1995, Condensed Consolidated Statements of Cash Flows - - Six months ended June 30, 1996 and 1995. Notes to Condensed Consolidated Financial Statements. 8 FORM 10 - Q - - PART I - ITEM 1 EMPI, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
June 30 December 31 1996 1995 ----------- ----------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,686 $ 5,949 Short-term investments 17,815 13,090 Accounts and notes receivable-trade, less allowances 14,968 15,846 Inventories - Note B 7,252 8,269 Deferred income taxes 5,639 4,842 Other 726 706 ----------- ----------- TOTAL CURRENT ASSETS 49,086 48,702 PROPERTY, PLANT AND EQUIPMENT - NET 4,871 5,129 OTHER ASSETS 4,203 4,906 LONG-TERM INVESTMENTS 500 2,000 ----------- ----------- $ 58,660 $ 60,737 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,935 $ 1,924 Employee compensation 1,558 1,955 Commissions payable 506 747 Current portion of long-term debt 687 676 Income taxes 56 634 Other 210 254 ----------- ----------- TOTAL CURRENT LIABILITIES 4,952 6,190 LONG-TERM DEBT, LESS CURRENT PORTION 1,407 1,468 SHAREHOLDERS' EQUITY: Common Stock 18,922 24,110 Retained earnings 33,379 28,969 ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 52,301 53,079 ----------- ----------- $ 58,660 $ 60,737 =========== ===========
See notes to condensed consolidated financial statements. 9 FORM 10 - Q - - PART I - ITEM 1 EMPI, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended June 30 June 30 ---------------------------- --------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Net sales $16,937 $16,274 $33,829 $32,798 Cost of goods sold 4,418 4,195 8,806 8,715 ----------- ----------- ----------- ----------- GROSS PROFIT 12,519 12,079 25,023 24,083 Operating Expenses: Selling, general and administrative 8,345 8,195 16,934 16,666 Research and development 882 899 1,674 1,737 ----------- ----------- ----------- ----------- 9,227 9,094 18,608 18,403 ----------- ----------- ----------- ----------- INCOME FROM OPERATIONS 3,292 2,985 6,415 5,680 Other income/(expense), net 242 192 756 298 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 3,534 3,177 7,171 5,978 Income tax expense 1,361 1,238 2,761 2,331 ----------- ----------- ----------- ----------- NET INCOME $ 2,173 $ 1,939 $ 4,410 $ 3,647 =========== =========== =========== =========== NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ .25 $ .22 $ .50 $ .42 =========== =========== =========== =========== Weighted average common and common equivalent shares outstanding during the period 8,754 8,752 8,863 8,715 =========== =========== =========== ===========
See notes to condensed consolidated financial statements. 10 FORM 10 - Q - - PART I - ITEM 1 EMPI, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) Six Months Ended, June 30 1996 1995 ---------- ----------- (unaudited) (unaudited) OPERATING ACTIVITIES Net income $ 4,410 $3,647 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,736 1,635 Provision for deferred income taxes (797) (408) Gain on sale of long-term investments --- (70) Loss on sale of equipment 19 5 Provision for loss on accounts receivable 1,082 1,269 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (204) 83 (Increase) decrease in inventories 1,017 (1,159) Increase in other assets/liabilities (7) (253) Increase (decrease) in accounts payable and accrued expenses (627) 57 Increase in income taxes payable (280) (465) ---------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 6,349 4,341 INVESTING ACTIVITIES Sale of short-term investments 7,218 1,796 Purchase of short-term investments (11,943) (1,870) Sale of long-term investments 1,500 150 Purchase of long-term investments --- (2,479) Additions to other assets (142) --- Purchase of equipment and improvements (723) (675) Proceeds from sale of equipment 14 9 ---------- ----------- NET CASH USED IN INVESTING ACTIVITIES (4,076) (3,069) FINANCING ACTIVITIES Payments on long-term debt (50) (3) Purchase and retirement of Common Stock (5,552) Proceeds from exercise of Common Stock options 66 36 ---------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (5,536) 33 ---------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,263) 1,305 Cash and cash equivalents at beginning of year 5,949 5,652 ---------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,686 $ 6,957 ========== ===========
See notes to condensed consolidated financial statements. 11 FORM 10 - Q - - PART I - ITEM 1 EMPI, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE A - ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of the Company, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the results have been included. Operating results for the three months and six months ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in Empi, Inc. and Subsidiaries' annual report on Form 10-K for the year ended December 31, 1995. NOTE B - INVENTORIES (In thousands) June 30 December 31 1996 1995 ----------- ----------- (unaudited) Finished goods $ 5,321 $ 5,873 Work in process 531 632 Raw materials 1,400 1,764 ----------- ----------- $ 7,252 $ 8,269 =========== =========== EXHIBITS Exhibit No. Description ------------ ------------- (11) Statement re: computation of per share earnings (27) Financial Data Schedule (filed only in electronic format) 12 EX-11 2 EXHBIIT 11 EXHIBIT 11 - - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Three Months Ended, Six Months Ended, June 30 June 30 1996 1995 1996 1995 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) PRIMARY EARNINGS PER SHARE: Average shares outstanding 8,526 8,592 8,584 8,585 Net effect of dilutive stock options and warrants - based on the treasury stock method using average market price 228 160 279 130 ----------- ----------- ----------- ----------- 8,754 8,752 8,863 8,715 =========== =========== =========== =========== Net income $ 2,173 $ 1,939 $ 4,410 $ 3,647 =========== =========== =========== =========== Net income per share $ .25 $ .22 $ .50 $ .42 =========== =========== =========== =========== FULLY-DILUTED EARNINGS PER SHARE: Average shares outstanding 8,526 8,592 8,584 8,585 Net effect of dilutive stock options and warrants - based on the treasury stock method using closing market price 228 176 279 130 ----------- ----------- ----------- ----------- 8,754 8,768 8,863 8,715 =========== =========== =========== =========== Net income $ 2,173 $ 1,939 $ 4,410 $ 3,647 =========== =========== =========== =========== Net income per share $ .25 $ .22 $ .50 $ .42 =========== =========== =========== =========== 13 EX-27 3 EXHIBIT 27 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SECOND QUARTER 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 2,686 17,815 20,082 5,114 7,252 49,086 13,101 8,230 58,660 4,952 1,407 18,922 0 0 33,379 58,660 30,413 33,829 8,220 8,806 18,608 1,082 42 7,171 2,761 4,410 0 0 0 4,410 .50 .50
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