-----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, AMUKpCEBH3wkUbH/F5onm42KoW57jYRjFg769tb01rqKpV+MhDULd7d1gdPT/bPS D3NJg5g/CLy1D2IZu5dDpg== 0000950132-96-000049.txt : 19960410 0000950132-96-000049.hdr.sgml : 19960410 ACCESSION NUMBER: 0000950132-96-000049 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960209 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESPIRONICS INC CENTRAL INDEX KEY: 0000780434 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 251304989 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16723 FILM NUMBER: 96513626 BUSINESS ADDRESS: STREET 1: 1001 MURRY RIDGE DR CITY: MURRYSVILLE STATE: PA ZIP: 15668 BUSINESS PHONE: 4127330200 MAIL ADDRESS: STREET 1: 1001 MURRY RIDGE DRIVE CITY: MURRYSVILLE STATE: PA ZIP: 15668 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) X Quarterly Report pursuant to section 13 or 15(d) of the Securities - Exchange Act of 1934 for the quarterly period ended December 31, 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 No. 000-16723 RESPIRONICS, INC. (Exact name of registrant as specified in its charter) Delaware 25-1304989 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 1001 Murry Ridge Dr. Murrysville, Pennsylvania 15668 (Address of principal executive offices) (Zip Code) (Registrant's Telephone Number, including area code) 412-733-0200 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 and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No [_]. - As of January 31, 1996, there were 16,859,314 shares of Common Stock of the registrant outstanding. INDEX RESPIRONICS, INC. PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited). Consolidated balance sheets -- December 31, 1995 and June 30, 1995. Consolidated statements of operations -- Three months ended December 31, 1995 and 1994 and six months ended December 31, 1995 and 1994. Consolidated statements of cash flows-- Six months ended December 31, 1995 and 1994. Notes to consolidated financial statements -- December 31, 1995. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings. Item 2. Changes in Securities. Item 3. Defaults Upon Senior Securities. Item 4. Submission of Matters to a Vote of Security Holders. Item 5. Other Information. Item 6. Exhibits and Reports on Form 8-K. SIGNATURES - ---------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements CONSOLIDATED BALANCE SHEETS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES
December 31 June 30 1995 1995 ASSETS CURRENT ASSETS Cash and short-term investments $ 9,792,908 $16,126,904 Trade accounts receivable, less allowance for doubtful accounts of $850,000 and $700,000 25,026,073 19,448,187 Inventories 17,300,722 13,136,664 Prepaid expenses and other 2,338,969 1,951,358 Deferred income tax benefits 2,200,595 2,200,595 ----------- ----------- TOTAL CURRENT ASSETS 56,659,267 52,863,708 PROPERTY, PLANT AND EQUIPMENT Land 2,773,246 2,589,117 Building 8,779,610 8,674,675 Machinery and equipment 15,762,719 14,155,510 Furniture and office equipment 10,681,202 9,394,000 Leasehold improvements 979,717 577,175 ----------- ----------- 38,976,494 35,390,477 Less allowances for depreciation and amortization 17,207,404 15,443,041 ----------- ----------- 21,769,090 19,947,436 Funds held in trust for construction of new facility 729,087 710,929 OTHER ASSETS 3,024,794 2,668,592 COST IN EXCESS OF NET ASSETS OF BUSINESS ACQUIRED 1,769,271 1,847,905 ------------ ------------ $ 83,951,509 $ 78,038,570 ============ ============
See notes to consolidated financial statements.
December 31 June 30 1995 1995 --------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,974,185 $ 4,858,554 Accrued compensation and related expenses 2,932,812 3,827,187 Accrued expenses 3,479,913 2,694,298 Income taxes 1,633,650 1,572,121 Current portion of long-term obligations 492,729 498,150 ----------- ----------- TOTAL CURRENT LIABILITIES 12,513,289 13,450,310 LONG-TERM OBLIGATIONS 5,241,953 5,537,996 MINORITY INTEREST 646,199 681,068 COMMITMENTS SHAREHOLDERS' EQUITY Common Stock, $.01 par value; authorized 40,000,000 shares; issued and outstanding 16,851,860 shares at December 31, 1995 and 16,744,785 shares at June 30, 1995 168,519 167,448 Additional capital 19,706,538 19,254,977 Retained earnings 45,675,011 38,946,771 ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 65,550,068 58,369,196 ----------- ----------- $83,951,509 $78,038,570 =========== ===========
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES
Three months ended Six months ended December 31 December 31 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Net sales $30,241,119 $23,867,803 $56,915,794 $45,537,612 Cost of goods sold 13,380,809 10,188,631 24,895,319 19,659,362 ----------- ----------- ----------- ----------- 16,860,310 13,679,172 32,020,475 25,878,250 General and administrative expenses 3,831,024 3,643,180 7,847,827 6,811,820 Sales, marketing and commission expense 4,989,268 4,414,508 9,513,054 8,298,675 Research and development expense 2,368,426 1,589,549 4,061,333 3,060,328 Interest expense 50,541 48,883 100,595 95,943 Other income (216,475) (296,917) (532,235) (509,783) ----------- ----------- ----------- ----------- 11,022,784 9,399,203 20,990,574 17,756,983 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 5,837,526 4,279,969 11,029,901 8,121,267 Income taxes 2,328,558 1,583,589 4,301,661 3,004,871 ----------- ----------- ----------- ----------- NET INCOME $ 3,508,968 $ 2,696,380 $ 6,728,240 $ 5,116,396 =========== =========== =========== =========== Earnings per share $ 0.20 $ 0.15 $ 0.38 $ 0.29 =========== =========== =========== =========== Weighted Average Number of Shares Used in Computing Earnings Per Share 17,601,685 17,417,532 17,730,325 17,346,028
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES
Six months ended December 31 1995 1994 ---------------------------- OPERATING ACTIVITIES Net income $ 6,728,240 $5,116,396 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,842,997 1,956,623 Provision for losses on accounts receivable 150,000 75,000 Changes in operating assets and liabilities: Increase in accounts receivable (5,727,886) (2,793,514) Decrease in refundable income taxes -0- 1,787,265 Increase in inventories and prepaid expenses (4,551,669) (2,387,016) Increase in other assets (356,202) (73,948) Decrease in accounts payable (884,369) (765,318) Decrease in accrued compensation and related expenses (894,375) (36,256) Increase in accrued expenses 785,615 447,217 Increase (decrease) in accrued income taxes 61,529 (31,624) ----------- ----------- NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (2,846,120) 3,294,825 INVESTING ACTIVITIES Purchase of property, plant and equipment (3,586,017) (2,961,843) Increase in funds held in trust for construction of new facility (18,158) (12,595) ----------- ------------ NET CASH USED BY INVESTING ACTIVITIES (3,604,175) (2,974,438) FINANCING ACTIVITIES Reduction in long-term obligations (301,464) (233,028) Issuance of common stock 452,632 400,305 (Decrease) increase in minority interest (34,869) 4,601 ----------- ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 116,299 171,878 ----------- ------------ (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS (6,333,996) 492,265 Cash and short-term investments at beginning of period 16,126,904 12,384,054 ----------- ------------ CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 9,792,908 $ 12,876,319 =========== ============
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES DECEMBER 31, 1995 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited 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, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended December 31, 1995 are not necessarily indicative of the results that may be expected for the year ended June 30, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 1995. NOTE B -- INVENTORIES The composition of inventory is as follows:
December 31 June 30 1995 1995 ------------- ------------ Raw materials $ 12,821,590 $ 7,960,573 Work-in-process 1,496,414 1,105,010 Finished goods 2,982,718 4,071,081 ------------- ------------ $ 17,300,722 $ 13,136,664 ============= ============
NOTE C -- CONTINGENCY As previously disclosed, the Company is a party to an action filed in a federal District Court in January 1995 in which a competitor alleges that the Company's sale in the United States of certain products infringes three of the competitor's patents. In its response to the action, the Company has denied the allegations and has separately sought a declaratory judgment that the claims under the patents are invalid and that the Company does not infringe upon the patents. Discovery in the case is continuing. The Company believes that none of its products infringe any of the patents in question in the event that any one or more of such patents should be held to be valid, and it intends to vigorously defend this position. Item 2. Management's Discussion and Analysis of Result of Operations - ------- ------------------------------------------------------------ and Financial Condition ----------------------- RESULTS OF OPERATIONS Net sales for the quarter ended December 31, 1995 were $30,241,000 representing a 27% increase over the $23,868,000 recorded for the quarter ended December 31, 1994. Sales for the six months ended December 31, 1995 were $56,916,000, an increase of 25% over the $45,538,000 recorded in the year earlier period. The increases in net sales were primarily attributable to increases in total unit and dollar sales for the Company's obstructive sleep apnea and ventilatory support products. Sales of the Company's face masks and other patient interface devices used as accessories for its obstructive sleep apnea and ventilatory support units increased significantly in both unit and dollar terms as well. The Company's gross profit was 56% of net sales for the quarter ended December 31, 1995 as compared to 57% for the quarter ended December 31, 1994. Gross profit for the six months ended December 31, 1995 was also 56% of net sales as compared to 57% of net sales for the year earlier period. The decreases in the gross margin percentage were caused by reduced average selling prices, primarily for the Company's REMstar Nasal CPAP systems, during the current quarter and six month period. These reductions in average selling price resulted from increasing competition in the obstructive sleep apnea market, particularly relative to the Company's large, national customers who receive lower prices in exchange for volume purchase commitments. General and administrative expenses were $3,831,000 (13% of net sales) for the quarter ended December 31, 1995 as compared to $3,643,000 (15% of net sales) for the quarter ended December 31, 1994. General and administrative expenses were $7,848,000 (14% of net sales) for the six months ended December 31, 1995 as compared to $6,812,000 (15% of net sales) for the year earlier period. The decreases in these expenses as a percentage of net sales reflect the Company's ability, for the periods indicated, to limit spending increases in these areas to rates less than the rate of sales increase. The increases in absolute dollars were due primarily to increased legal fees incurred relating to the previously disclosed action brought against the Company by Rescare Limited, a competitor. Sales, marketing and commission expenses were $4,989,000 (16% of net sales) for the quarter ended December 31, 1995 as compared to $4,415,000 (18% of net sales) for the quarter ended December 31, 1994. Sales, marketing and commission expenses were $9,513,000 (17% of net sales) for the six months ended December 31, 1995 as compared to $8,299,000 (18% of net sales) for the year earlier period. The decreases in these expenses as a percentage of net sales reflect the Company's ability, for the periods indicated, to limit spending increases in these areas to rates less than the rate of sales increase. The increases in absolute dollars were due primarily to costs associated with trade shows and related travel expenses, salary expenses for new employees, and commission expenses based on higher sales levels achieved. Research and development expenses were $2,368,000 (8% of net sales) for the quarter ended December 31, 1995 as compared to $1,590,000 (7% of net sales) for the quarter ended December 31, 1994. Research and development expenses were $4,061,000 (7% of net sales) for the six months ended December 31, 1995 as compared to $3,060,000 (7% of net sales) for the year earlier period. These increases in absolute dollars (and as a percentage of net sales for the quarter to quarter comparison) reflect the extensive new product development efforts during the periods and concurrently underway to support new product introductions in the Company's major product groups and also to explore opportunities in other respiratory product areas. Several new products have been introduced during the current fiscal year, and other new product introductions are scheduled for the remainder of the fiscal year, in some cases with initial distribution in international markets until regulatory clearance to market in the United States is obtained. Subsequent to the end of the current quarter, the Company received clearance from the United States Food and Drug Administration to market its new Aria CPAP System and two new face mask products in the United States. The Company's effective income tax rate was 40% for the quarter ended December 31, 1995 as compared to 37% for the quarter ended December 31, 1994 and 39% for the six months ended December 31, 1995 as compared to 37% for the six months ended December 31, 1994. Changes in the Company's effective income tax rate are due primarily to changes in the relative proportion of the Company's taxable income attributable to its United States operation versus taxable income attributable to its Hong Kong and Peoples Republic of China operations. The United States operation pays income taxes at a higher rate (approximately 41% before available income tax credits) than do the Hong Kong and Peoples Republic of China operations. For the quarterly and year-to-date comparisons, the proportion of taxable income attributable to the United States operation increased. In addition, the research and development tax credit expired effective July 1, 1995. This income tax credit had been available during prior fiscal years to reduce income taxes paid by the United States operation and therefore reduce the effective income tax rate. As a result of the factors described above, the Company's net income was $3,509,000 (12% of net sales) for the quarter ended December 31, 1995 as compared to $2,696,000 (11% of net sales) for the quarter ended December 31, 1994 and $6,728,000 (12% of net sales) for the six months ended December 31, 1995 as compared to $5,116,000 (11% of net sales) for the six months ended December 31, 1994. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $44,146,000 at December 31, 1995 and $39,413,000 at June 30, 1995. Net cash used by operating activities was $2,846,000 for the six months ended December 31, 1995 as compared to net cash provided by operating activities of $3,295,000 for the six months ended December 31, 1994. The net use of cash for the current six month period was due primarily to increases in accounts receivable and inventory in amounts greater than the changes in those accounts during the first six months of last fiscal year. The increase in accounts receivable was due to growth in international sales at a rate greater than overall sales growth (all international sales are made on extended payment terms) and to a continued increase in the portion of the Company's domestic sales that are being made on extended payment terms. The increase in inventory was due to the Company's purchase of raw materials for, and the initial production of, many of its new products, including those introduced during the current six month period and those scheduled for introduction during the remainder of the fiscal year. Net cash used by investing activities was $3,604,000 for the six months ended December 31, 1995 as compared to $2,974,000 for the three months ended December 31, 1994. Essentially all of the cash used by investing activities for both periods represented capital expenditures, including the purchase of production equipment, computer and telecommunications equipment, and office equipment. The funding for capital expenditures in the current six month period was provided by accumulated cash and short-term investment balances, and in the first six months of last fiscal year was provided by positive cash flows from operating activities and by accumulated cash and short-term investment balances. The Company believes that positive cash flow from operating activities projected for the remainder of the fiscal year, the availability of the full amount of funds under its commercial bank line of credit, and its accumulated cash and short-term investments will be sufficient to meet its current and presently anticipated future needs for the remainder of fiscal year 1996 for operating activities, investing activities, and financing activities (primarily consisting of payments on long-term debt). PART 2 OTHER INFORMATION, Item 1: Legal Proceedings - ------- ----------------- Not applicable Item 2: Change in Securities - ------- -------------------- (a) Not applicable (b) Not applicable Item 3: Defaults Upon Senior Securities - ------- ------------------------------- (a) Not applicable (b) Not applicable Item 4: Submission of Matters to a Vote of Security Holders - ------- --------------------------------------------------- The Company's Annual Meeting of Shareholders was held on November 8, 1995. The holders of 13,503,570 shares of the Company's -------- stock (approximately 80% of the outstanding shares) were present at -- the meeting in person or by proxy. The only matters voted upon at the meeting were (i) the election of three persons to serve as directors for a three year term expiring at the annual meeting of the shareholders in 1998, and (ii) the ratification of the selection of Ernst & Young as independent public accountants to audit the financial statements of the Company for the fiscal year ending June 30, 1996. Douglas A. Cotter, Ph.D., George J. Magovern, M.D., and Gerald E. McGinnis, the nominees of the Company's Board of Directors, were elected to serve until 1998. There were no other nominees. Shares were voted as follows:
Withhold Name For Vote For - ----------------------------------------------------------- Douglas A. Cotter, Ph.D. 13,403,115 37,827 George J. Magovern, M.D. 13,375,524 65,418 Gerald E. McGinnis 13,372,315 68,627
The selection of Ernst & Young as independent public accountants for the 1996 fiscal year was ratified: affirmative votes, 13,483,723 shares; negative votes, 19,847 shares. Item 5: Other Information - ------- ----------------- Not applicable Item 6: Exhibits and Reports on Form 8-K - ------- -------------------------------- (a) Exhibits Not applicable (b) Reports on Form 8-K Not applicable 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. RESPIRONICS, INC. Date: February 9, 1996 /s/ Daniel J. Bevevino ------------------------------ ------------------------------ Daniel J. Bevevino Controller, and Chief Financial and Accounting Officer Signing on behalf of the registrant and as Chief Financial and Accounting Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS 6-MOS JUN-30-1996 JUN-30-1995 JUL-01-1995 JUL-01-1994 DEC-31-1995 DEC-31-1994 9,792,908 12,876,319 0 0 25,876,073 18,329,799 850,000 600,000 17,300,722 10,169,177 56,659,267 44,016,832 38,976,494 32,376,578 17,207,404 13,886,534 83,951,509 63,819,513 12,513,289 8,792,569 0 0 0 0 0 0 168,519 164,376 65,381,549 49,576,434 83,951,509 63,819,513 56,915,794 45,537,612 56,915,794 45,537,612 24,895,319 19,659,362 24,895,319 19,659,362 21,422,214 18,170,823 0 0 100,595 95,943 11,029,901 8,121,267 4,301,661 3,004,871 6,728,240 5,116,396 0 0 0 0 0 0 6,728,240 5,116,396 0.38 0.29 0.38 0.29
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