-----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, Hmt0bSIXGNwe8gCgVof+SNJMKn9//SLdJrL3tvGGmc+u83EeO/d7GKzw8/dPtaNR qw9HQ+5yiGOYG03rKPFiFg== 0000950132-96-000709.txt : 19961118 0000950132-96-000709.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950132-96-000709 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD 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: 96665340 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 September 30, 1996 ------------------ 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 October 31, 1996, there were 19,701,972 shares of Common Stock of the registrant outstanding. INDEX RESPIRONICS, INC. PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited). Consolidated balance sheets -- September 30, 1996 and June 30, 1996. Consolidated statements of operations -- Three months ended September 30, 1996 and 1995. Consolidated statements of cash flows-- Three months ended September 30, 1996 and 1995. Notes to consolidated financial statements -- September 30, 1996. 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
September 30 June 30 1996 1996 -------------------------- ASSETS CURRENT ASSETS Cash and short-term investments $ 71,007,592 $ 65,255,699 Trade accounts receivable, less allowance for doubtful accounts of $1,250,000 and $1,200,000 25,604,223 27,883,365 Inventories 20,320,188 17,863,887 Prepaid expenses and other 2,308,675 2,522,327 Deferred income tax benefits 2,457,453 2,457,453 ----------- ----------- TOTAL CURRENT ASSETS 121,698,131 115,982,731 PROPERTY, PLANT AND EQUIPMENT Land 2,771,934 2,771,934 Building 8,952,740 8,907,692 Machinery and equipment 17,904,210 17,219,371 Furniture and office equipment 12,034,487 11,642,943 Leasehold improvements 1,065,314 1,068,851 ----------- ----------- 42,728,685 41,610,791 Less allowances for depreciation and amortization 20,219,901 19,294,440 ----------- ----------- 22,508,784 22,316,351 Funds held in trust for construction of new facility 754,571 746,114 OTHER ASSETS 3,096,615 3,210,802 COST IN EXCESS OF NET ASSETS OF BUSINESS ACQUIRED 1,651,319 1,690,636 ----------- ----------- $149,709,420 $143,946,634 =========== ===========
See notes to consolidated financial statements.
September 30 June 30 1996 1996 --------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 4,920,243 $ 4,178,301 Accrued compensation and related expenses 4,543,551 5,088,077 Accrued expenses 3,655,608 3,801,780 Income taxes 4,463,701 2,907,545 Current portion of long-term obligations 549,294 572,905 ----------- ----------- TOTAL CURRENT LIABILITIES 18,132,397 16,548,608 LONG-TERM OBLIGATIONS 4,891,803 4,965,871 MINORITY INTEREST 641,333 887,320 COMMITMENTS SHAREHOLDERS' EQUITY Common Stock, $.01 par value; authorized 40,000,000 shares; issued and outstanding 19,312,535 shares at September 30, 1996 and 19,305,406 shares at June 30, 1996 193,125 193,054 Additional capital 67,150,795 67,105,290 Retained earnings 58,738,855 54,285,379 Treasury stock (38,888) (38,888) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 126,043,887 121,544,835 ----------- ----------- $149,709,420 $143,946,634 =========== ===========
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES
Three months ended September 30 1996 1995 ------------------------- Net sales $34,112,412 $26,674,675 Cost of goods sold 15,043,248 11,514,510 ---------- ---------- 19,069,164 15,160,165 General and administrative expenses 4,622,102 4,016,803 Sales, marketing and commission expense 5,573,688 4,523,786 Research and development expense 2,492,293 1,692,907 Interest expense 47,480 50,054 Other income (967,180) (315,760) ---------- ---------- 11,768,383 9,967,790 ---------- ---------- INCOME BEFORE INCOME TAXES 7,300,781 5,192,375 Income taxes 2,847,305 1,973,103 ---------- ---------- NET INCOME $ 4,453,476 $ 3,219,272 ========== ========== Earnings per share $ 0.22 $ 0.18 ========== ========== Weighted Average Number of Shares Used in Computing Earnings Per Share 20,162,622 17,858,788
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES
Three months ended September 30 1996 1995 -------------------------- OPERATING ACTIVITIES Net income $ 4,453,476 $ 3,219,272 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 964,778 905,933 Provision for losses on accounts receivable 50,000 50,000 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 2,229,142 (1,015,213) Increase in inventories and prepaid expenses (2,242,649) (3,681,716) Decrease (increase) in other assets 114,187 (123,716) Increase (decrease) in accounts payable 741,942 (1,036,373) Decrease in accrued compensation and related expenses (544,526) (813,708) (Decrease) increase in accrued expenses (146,172) 526,318 Increase in accrued income taxes 1,556,156 1,792,915 ----------- ----------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 7,176,334 (176,288) INVESTING ACTIVITIES Purchase of property, plant and equipment (1,117,894) (2,182,476) Increase in funds held in trust for construction of new facility (8,457) (9,177) ----------- ----------- NET CASH USED BY INVESTING ACTIVITIES (1,126,351) (2,191,653) FINANCING ACTIVITIES Reduction in long-term obligations (97,679) (100,295) Issuance of common stock 45,576 295,097 Decrease in minority interest (245,987) (34,869) ----------- ----------- NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (298,090) 159,933 ----------- ----------- INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 5,751,893 (2,208,008) Cash and short-term investments at beginning of period 65,255,699 16,126,904 ----------- ----------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 71,007,592 $ 13,918,896 =========== ===========
See notes to consolidated financial statements SELECTED NOTE TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 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 three months ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ended June 30, 1997. 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, 1996. NOTE B -- INVENTORIES The composition of inventory is as follows:
September 30 June 30 1996 1996 -------------- ------------- Raw materials $ 11,875,643 $ 11,047,978 Work-in-process 2,341,440 2,075,329 Finished goods 6,103,105 4,470,580 ------------- ------------- $ 20,320,188 $ 17,863,887 ============= =============
NOTE C -- CONTINGENCIES As previously disclosed, the Company is a party to actions filed in a federal District Court in January 1995 and June 1996 in which a competitor alleges that the Company's manufacture and sale in the United States of certain products infringes four of the competitor's patents. In its response to these actions, the Company has denied the allegations and has separately sought a declaratory judgment that the claims under the patents are invalid or unenforceable and that the Company does not infringe upon the patents. Discovery in the case is currently underway. 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 enforceable and it intends to vigorously defend this position. Item 2. Management's Discussion and Analysis of Result of Operations and Financial Condition Certain statements in this quarterly report on Form 10-Q, including statements about the Company's belief or expectations or about whether any particular event or circumstances is likely to occur or continue, are forward-looking statements concerning the future operations of the Company. Such forward-looking statements are subject to risks and uncertainties. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are many important factors that could cause actual results to differ materially from those in the forward-looking staements contained herein. Additional information on potential factors that could effect the Company's financial results are included in the Company's annual report on Form 10-K for the fiscal year ended June 30, 1996. RESULTS OF OPERATIONS Net sales for the quarter ended September 30, 1996 were $34,112,000 representing a 28% increase over the $26,674,000 recorded for the quarter ended September 30, 1995. The increase in net sales was 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 also increased significantly in both unit and dollar terms. The Company's gross profit was 56% of net sales for the quarter ended September 30, 1996 as compared to 57% for the quarter ended September 30, 1995. This decrease in gross margin percentage was primarily caused by reduced average selling prices for certain of the Company's products. These reductions in average selling price, which had been expected, resulted from increasing competition in the company's primary product lines, particularly relative to large, national customers who received lower prices in exchange for volume purchase commitments. General and administrative expenses were $4,622,000 (14% of net sales) for the quarter ended September 30, 1996 as compared to $4,017,000 (15% of net sales) for the quarter ended September 30, 1995. The increase in absolute dollars was due primarily to an increased provision made during the quarter for bonuses based on financial results achieved during the quarter and to increased bad debt expenses. Sales, marketing and commission expenses were $5,574,000 (16% of net sales) for the quarter ended September 30, 1996 as compared to $4,524,000 (17% of net sales) for the quarter ended September 30, 1995. This increase in absolute dollars was due primarily to commission expenses based on higher sales levels achieved, salary expenses for new employees, and travel expenses related to product launch meetings. Research and development expenses were $2,492,000 (7% of net sales) for the quarter ended September 30, 1996 as compared to $1,693,000 (6% of net sales) for the quarter ended September 30, 1995. This increase in absolute dollars reflects the extensive new product development efforts currently underway to support new product introductions in the Company's major product groups. Several new product introductions are scheduled for the remainder of fiscal year 1997, in some cases with initial distribution in international markets until regulatory approval in the United States is obtained. The Company's effective income tax rate was 39% for the quarter ended September 30, 1996 as compared to 38% for the quarter ended September 30, 1995. 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 because the United States operation pays income taxes at a higher rate (approximately 40% before available income tax credits) than do the Hong Kong and Peoples Republic of China operations. For the quarter to quarter comparison, the proportion of taxable income attributable to the United States operation increased. As a result of the factors described above, the Company's net income was $4,453,000 (13% of net sales) for the quarter ended September 30, 1996 as compared to $3,219,000 (12% of net sales) for the quarter ended September 30, 1995. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $103,566,000 at September 30, 1996 and $99,434,000 at June 30, 1996. Net cash provided by operating activities was $7,176,000 for the three months ended September 30, 1996 as compared to net cash used by operating activities of $176,000 for the three months ended September 30, 1995. The increase in net cash provided by operating activities for the current quarter was due to a decrease in accounts receivable, an increase in accounts payable, an increase in inventory smaller than the increase in last year's first quarter, and higher earnings. Net cash used by investing activities was $1,126,000 for the three months ended September 30, 1996 as compared to $2,192,000 for the three months ended September 30, 1995. 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 quarter was provided by positive cash flows from operating activities, and in last year's first quarter was provided by accumulated cash and short-term investment balances. On October 15, 1996, the Company announced that its status with Apria Healthcare had changed from "primary supplier" to sole "secondary supplier" effective in November 1996. This change is likely to impact sales levels for the fiscal year ending June 30, 1997. However, the Company will manage expense levels more aggressively and take other steps for the remainder of the fiscal year. These measures will be implemented with the goal of offsetting the impact of possible changes in sales to Apria and achieving the Company's earnings objectives. Because the extent to which this change in status will impact revenues is not known, no assurance can be given that these measures will compensate for a decrease in revenues from Apria. Sales to Apria during the fiscal year ended June 30, 1996 were $20,500,000, or 16 percent of total sales. On October 21, 1996, the Company completed its previously announced acquisition of the capital stock of LIFECARE International, Inc. for $50 million in cash. The cash for the acquisition came from the Company's accumulated cash and short term investments. 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 1997 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 - ------------------------------------------------------------- Not Applicable 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: November 13, 1996 /s/ Daniel J. Bevevino _________________ _____________________________ Daniel J. Bevevino Vice President, and Chief Financial and Accounting Officer Signing on behalf of the registrant and as Chief Financial and Accounting Officer EX-27.1 2 FINANCIAL DATA SCHEDULE
5 3-MOS 3-MOS JUN-30-1997 JUN-30-1996 JUL-01-1996 JUL-01-1995 SEP-30-1996 SEP-30-1995 71,007,592 13,918,896 0 0 25,604,223 20,413,400 1,250,000 750,000 20,320,188 16,675,789 121,698,131 55,302,629 42,728,685 37,572,953 20,219,901 16,309,657 149,709,420 81,886,927 18,132,397 13,916,767 0 0 0 0 0 0 193,125 168,112 125,850,762 61,715,453 149,709,420 81,886,927 34,112,412 26,674,675 34,112,412 26,674,675 15,043,248 11,514,510 15,043,248 11,514,510 11,720,903 9,917,736 0 0 47,480 50,054 7,300,781 5,192,375 2,847,305 1,973,103 4,453,476 3,219,272 0 0 0 0 0 0 4,453,476 3,219,272 0.22 0.18 0.22 0.18
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