0000950112-95-002121.txt : 19950815 0000950112-95-002121.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950112-95-002121 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAHAM FIELD HEALTH PRODUCTS INC CENTRAL INDEX KEY: 0000709136 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 112578230 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08801 FILM NUMBER: 95562262 BUSINESS ADDRESS: STREET 1: 400 RABRO DR E CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5165825800 FORMER COMPANY: FORMER CONFORMED NAME: PATIENT TECHNOLOGY INC DATE OF NAME CHANGE: 19880811 10-Q 1 GRAHAM-FIELD HEALTH PRODUCTS, INC. FORM 10-Q Securities and Exchange Commission Washington, D.C. 20549 (Mark One) [ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 1995 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 0-10881 NY ---------- GRAHAM-FIELD HEALTH PRODUCTS, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 11-2578230 ---------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 Rabro Drive East, Hauppauge, New York 11788 ------------------------------------------------ (Address of principal executive offices) (516) 582-5900 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not applicable -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 ------- ------- Applicable Only to Issuers Involved in Bankruptcy Proceedings During the Preceding Five Years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court. Yes No ------- ------ Applicable Only to Corporate Issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.025 Par Value--- 13,010,000 shares as of August 10, 1995 GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES --------------------------------------------------- I N D E X --------- Part I. Financial Information: Page ---- Item 1. Financial Statements: Condensed Consolidated Balance Sheets - June 30, 1995 (Unaudited) and December 31, 1994 (Audited) 3 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 1995 and 1994 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1994 (Unaudited) 5/6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7/8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9/10/11 Part II. Other Information: Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 11 Page 2 PART I. FINANCIAL INFORMATION --------------------- Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES --------------------------------------------------- June 30, December 31, ASSETS 1995 1994 ------ ------------ ------------ (unaudited) (audited) CURRENT ASSETS: Cash and cash equivalents $ 988,000 $ 121,000 Accounts receivable - net 19,280,000 19,173,000 Inventories 24,970,000 30,410,000 Other current assets 1,462,000 1,135,000 Recoverable and prepaid income taxes 237,000 239,000 ----------- ------------ TOTAL CURRENT ASSETS 46,937,000 51,078,000 PROPERTY, PLANT AND EQUIPMENT - net 8,669,000 9,245,000 EXCESS OF COST OVER NET ASSETS ACQUIRED - net 29,075,000 29,531,000 INVESTMENT IN LEVERAGED LEASE 487,000 488,000 OTHER ASSETS 5,354,000 5,659,000 DEFERRED TAX ASSET 3,424,000 3,493,000 ----------- ------------ TOTAL ASSETS $93,946,000 $99,494,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Note payable to bank $ - $ 673,000 Current maturities of long-term debt and guaranteed senior notes 1,630,000 615,000 Accounts payable 5,490,000 7,901,000 Acceptances payable 8,350,000 10,350,000 Accrued expenses 2,706,000 3,257,000 ----------- ----------- TOTAL CURRENT LIABILITIES 18,176,000 22,796,000 LONG-TERM DEBT 1,301,000 1,596,000 GUARANTEED SENIOR NOTES 19,000,000 20,000,000 ----------- ----------- TOTAL LIABILITIES 38,477,000 44,392,000 STOCKHOLDERS' EQUITY: Preferred Stock -- -- Common Stock 325,000 323,000 Additional paid-in capital 63,405,000 63,145,000 (Deficit) (8,261,000) (8,366,000) ----------- ------------ TOTAL STOCKHOLDERS' EQUITY 55,469,000 55,102,000 COMMITMENTS AND CONTINGENCIES TOTAL LIABILITIES AND STOCKHOLDERS' ------------ ----------- EQUITY $ 93,946,000 $99,494,000 ============ ===========
See notes to condensed consolidated financial statements. Page 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES --------------------------------------------------- (Unaudited) Three Months Ended Six Months Ended June 30 June 30 ------------- -------------- 1995 1994 1995 1994 -------- -------- -------- -------- REVENUES: Operations $24,327,000 $24,100,000 $48,818,000 $46,537,000 Interest and other income 8,000 25,000 16,000 44,000 ----------- ----------- ----------- ---------- 24,335,000 24,125,000 48,834,000 46,581,000 COST AND EXPENSES: Cost of revenues 16,763,000 16,504,000 33,535,000 31,948,000 Selling, general and administrative 6,818,000 6,951,000 13,690,000 13,887,000 Interest expense 690,000 648,000 1,435,000 1,272,000 ----------- ----------- ----------- ----------- 24,271,000 24,103,000 48,660,000 47,107,000 INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT) 64,000 22,000 174,000 (526,000) INCOME TAXES (BENEFIT) 25,000 11,000 69,000 (165,000) ------------ ------------ ------------ ----------- NET INCOME (LOSS) $ 39,000 $ 11,000 $ 105,000 $ (361,000) ============ =========== =========== ============ PER SHARE DATA: NET INCOME (LOSS) PER SHARE $ .00 $ .00 $ .01 $ (.03) ============ =========== =========== ============ WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 13,021,000 12,877,000 13,007,000 12,833,000 ============ =========== =========== ===========
See notes to condensed consolidated financial statements. Page 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES --------------------------------------------------- (Unaudited) Six Months Ended June 30 ----------------- 1995 1994 ----------- ----------- OPERATING ACTIVITIES Net income (loss) $ 105,000 $ (361,000) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,681,000 1,614,000 Provision for losses on accounts receivable 195,000 227,000 Deferred income taxes 69,000 (165,000) Deferred Compensation -- 4,000 Changes in operating assets and liabilities: Accounts receivable (302,000) (1,571,000) Inventories, other current assets and recoverable and prepaid income taxes 5,115,000 1,187,000 Accounts and acceptances payable and accrued expenses (4,962,000) (37,000) ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 1,901,000 898,000 ----------- ----------- INVESTING ACTIVITIES Purchases of property, plant and equipment (295,000) (515,000) Decrease of other assets 42,000 (207,000) ------------ ------------ NET CASH (USED IN) INVESTING ACTIVITIES $ (253,000) $ (722,000) ------------ -----------
Page 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES --------------------------------------------------- (Unaudited) Six Months Ended June 30 -------------------- 1995 1994 ----------- ----------- FINANCING ACTIVITIES Proceeds from note payable to bank $ 1,000,000 $ -- Payments on note payable to bank (1,673,000) -- Principal payments on long term debt (280,000) (227,000) Proceeds on exercise of stock options 172,000 65,000 ----------- ----------- NET CASH (USED IN) FINANCING ACTIVITIES (781,000) (162,000) ----------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 867,000 14,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 121,000 565,000 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 988,000 $ 579,000 ============ ===========
See notes to condensed consolidated financial statements. Page 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES --------------------------------------------------- (Unaudited) 1. GENERAL ------- In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of June 30, 1995 (unaudited) and December 31, 1994 (audited), the results of operations for the three and six months ended June 30, 1995 and 1994 (unaudited) and the statements of cash flows for the six months ended June 30, 1995 and 1994 (unaudited). Additionally, it should be noted that the accompanying financial statements and notes thereto do not purport to be complete disclosures in conformity with generally accepted accounting principles. While the Company believes that the disclosures presented are adequate to make the information contained herein not misleading, it is suggested that these financial statements be read in conjunction with the financial statements and the notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Inventories at June 30, 1995 have been valued at average cost based on perpetual records or gross profit method. The results of operations for the three and six months ended June 30, 1995 and 1994 are not necessarily indicative of results for the full year. Certain 1994 amounts have been reclassified to conform with 1995 classifications. 2. NET INCOME (LOSS) PER SHARE --------------------------- Net income per common share for the three and six months ended June 30, 1995 and the three months ended June 30, 1994 was computed using the weighted average number of common shares and dilutive common equivalent shares outstanding during the period. Net loss per common share for the six months ended June 30, 1994 was computed using the weighted average number of common shares outstanding during the period. 3. INVENTORIES ----------- Inventories consist of the following: June 30 December 31 1995 1994 ----------- -------------- Raw materials $ 2,673,000 $ 3,112,000 Work-in-process 1,301,000 1,183,000 Finished goods 20,996,000 26,115,000 ---------- ----------- $24,970,000 $30,410,000 =========== =========== Page 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Continued GRAHAM-FIELD HEALTH PRODUCTS, INC. AND SUBSIDIARIES --------------------------------------------------- (Unaudited) 4. INCOME TAXES ------------ Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement No. 109"). Under Statement No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. As of June 30, 1995, the Company has recorded net deferred tax assets of $3,424,000. These tax assets are primarily comprised of net operating loss carryforwards and investment, research and development, jobs tax and alternate minimum tax credits. Based upon the Company's expectation that future taxable income will exceed $9,254,000 prior to December 31, 2009, the Company has not recorded a valuation allowance of these tax assets, except for an allowance of $55,000 related to tax assets recorded for acquired carryforwards. Future taxable income is expected to be derived from the Company's existing operations and a tax planning strategy which anticipates the recognition of a taxable gain on the sale of appreciated assets. 5. OTHER MATTERS ------------- On June 5, 1995, the Company entered into an amended letter of intent to sell the Consumer Business of its HealthTeam subsidiary to the Lumiscope Company, in exchange for the acquisition of the Medical Products Division of Lumiscope, a privately owned company. The Medical Products Division of Lumiscope currently markets and distributes Tens Units, sphygmomanometers, stethoscopes, patient aids and other medical products to the home healthcare and medical/surgical markets. The consumer business of the Company's HealthTeam subsidiary markets and distributes diagnostic products, breast pumps and related accessories, infrared heat lamps, massagers, and a variety of consumer health products to the consumer/retail market. The Company is still in the process of conducting its due diligence and there can be no assurance that the transaction will be completed. 6. LEGAL PROCEEDINGS ----------------- SEE PART II, ITEM 1 ON PAGE 11 Page 8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Operating Revenues ------------------ Operating revenues for the three months ended June 30, 1995 increased approximately $227,000 or 1% as compared to the same period last year. Operating revenues for the six months ended June 30, 1995, increased approximately $2,281,000 or 5% as compared to the same period last year. The increase in operating revenues for the three and six month periods of 1995 compared to 1994 was primarily due to the Company's improved customer service and efficiency levels, which reflects the continued recovery of certain revenues affected by past service and efficiency problems. The revenue increase was achieved despite the troubled economic conditions in Mexico during 1995. The Company's sales to customers in Mexico declined by approximately $600,000 for the first half of 1995 as compared to the first half of 1994. In addition, the increase is also attributable to the Company's continued expansion of its product line resulting from new and expanded distribution agreements with vendors. Interest and Other Income ------------------------- Interest and other income for the three and six month periods ended June 30, 1995 decreased $17,000 and $28,000, respectively, as compared to the same periods last year. The decrease in interest and other income reflects lower cash balances on hand during these periods. Cost of Revenues ---------------- Cost of revenues as a percentage of operating revenues for the three months ended June 30, 1995 increased to 68.9% from 68.5% in the same period last year. The increase in cost of revenues is primarily related to unfavorable exchange rates experienced in the period with foreign suppliers and increased sales in the home healthcare market place, which traditionally has had lower margins. Cost of revenues as a percentage of operating revenues was 68.7% for both the six month periods ended June 30, 1995 and 1994. Selling, General and Administrative Expenses -------------------------------------------- Selling, general and administrative expenses as a percentage of operating revenues for the three months ended June 30, 1995 were 28% as compared to 29% in the same period last year. Selling, general and administrative expenses as a percentage of operating revenues for the six months ended June 30, 1995 were 28% as compared to 30% in the same period last year. The decrease in both fiscal periods is primarily due to cost reduction programs and the efficiencies generated by the Company's distribution network and investment in new business systems. Page 9 Interest Expense ---------------- Interest expense for the three months ended June 30, 1995 increased $42,000 or 6% as compared to the same period last year. For the six months ended June 30, 1995, interest expense increased $163,000 or 13% as compared to the same period last year. The increase in interest expense in both periods is primarily due to an increase in interest rates from the prior periods. Net Income ---------- Income before income taxes for the three months ended June 30, 1995 was $64,000 as compared to $22,000 in the same period last year. Income before income taxes for the six months ended June 30, 1995 was $174,000 as compared to a loss before income taxes of $526,000 in the same period last year. The increase in income before income taxes is primarily due to the increase in revenues as a result of improved customer service and efficiency levels, which reflects the continued recovery of certain revenue affected by past service efficiency problems, and the decrease in selling, general and administrative expenses. Net income for the three months ended June 30, 1995 was $39,000 as compared to $11,000 for the same period last year. Net income for the six months ended June 30, 1995 was $105,000 as compared to a net loss of $361,000 for the same period last year. The Company recorded income tax expense of $69,000 for the six month period ended June 30, 1995, as compared to an income tax benefit of $165,000 recorded during the 1994 period. As of June 30, 1995, the Company has recorded net deferred tax assets of $3,424,000, primarily comprised of net operating loss carryforwards and investment, research and development, jobs tax and alternative minimum tax credits. Based upon the Company's expectation that future taxable income will exceed $9,254,000 prior to December 31, 2009, the Company has not recorded a valuation allowance on these deferred tax assets, except for an allowance of $55,000 related to tax assets recorded for acquired carryforwards. Future taxable income is expected to be derived from the Company's existing operations and a tax planning strategy which anticipates the recognition of a taxable gain on the sale of appreciated assets. The total deferred tax asset will continue to be evaluated by management as to its realizability on a quarterly basis. Uncertainties which could impact the future realizability, but are not expected to occur include the inability to implement the Company's tax planning strategy, and declines in sales and margins resulting from a possible loss of market share and increased competition. The Company's business has not been materially affected by inflation. Liquidity and Capital Resources ------------------------------- The Company had working capital of $28,761,000 at June 30, 1995, as compared to $28,282,000 at December 31, 1994. The increase in working capital is primarily attributable to the cash provided by the Company's net income of $105,000, which reflects $1,681,000 of amortization and depreciation expense. Page 10 Cash provided by operations for the six months ended June 30, 1995 was $1,901,000 as compared to $898,000 in the same period last year. The principal reason for the increase in cash provided by operations was the reduction in inventory as a result of the Company's improved purchasing activities and the Company's operating profit. The Company anticipates that its current cash balance together with expected cash flow from operations, and its bank line of credit will be sufficient to meet its working capital requirements. Financing --------- As of June 30, 1995, the Company renewed its unsecured line-of-credit with its bank for a period of one year. Due to the Company's increase in net income and cash provided from operations, the Company reduced its line of credit from $20,000,000 to $15,000,000 in connection with the June 1995 renewal of the line. The line is available for direct borrowings in the amount of up to $5,000,000, and provides for commercial letters of credit and bankers' acceptances. Credit availability under this line is subject to the bank's continuing satisfaction with current financial information. The line is guaranteed by the Company's wholly-owned subsidiaries. Interest on direct borrowings is payable at 1% above the bank's prime rate, acceptances are created for a fee of 2-1/2% above the bank's acceptance rate and commercial letters of credit have a commission rate of 3/8% per drawing. At June 30, 1995, there were no direct borrowings under the line. At June 30, 1995, $8,350,000 had been utilized under acceptances payable, which amount was reduced to $7,100,000 in July 1995. Open letters of credit relating to supplier purchases approximated $1,471,000 at June 30, 1995. Part II. Other Information ----------------- Item 1. Legal Proceedings There is no action, proceeding or investigation pending or threatened which has or may materially affect the condition (financial or otherwise), business, operations or properties of the Company. Item 6. Exhibits and Reports on Form 8-K The Company filed a Form 8-K on July 14, 1995. Page 11 S I G N A T U R E S ------------------- 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. GRAHAM-FIELD HEALTH PRODUCTS, INC. (Registrant) Date: August 10, 1995 /s/ Irwin Selinger ---------------------------------------------- Irwin Selinger Chairman of the Board and Chief Executive Officer Date: August 10, 1995 /s/ Gary M. Jacobs ---------------------------------------------- Gary M. Jacobs Vice President - Finance Chief Financial and Accounting Officer Page 12 EX-27 2 ART 5 FDS FOR 2ND QUARTER 10Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1995 AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AS INCLUDED IN THE FORM 10Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 6-MOS DEC-31-1995 JUN-30-1995 988 0 19,280 0 24,970 46,937 8,669 0 93,946 18,176 0 325 0 0 55,144 93,946 48,818 48,834 33,535 33,535 13,690 0 1,435 174 69 105 0 0 0 105 .01 .01