-----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, VJ5TQVkeE6L6/k8q5T2PAzleytPTIDK0i7d2W1+o0Z+mbBXywsqsGvf+7hi6CRlF C6UFLmRCN6Tc+68hfzhM6Q== 0000950149-99-002018.txt : 19991117 0000950149-99-002018.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950149-99-002018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVIVO CORP CENTRAL INDEX KEY: 0000806168 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 770115161 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15963 FILM NUMBER: 99753414 BUSINESS ADDRESS: STREET 1: 4900 HOPYARD RD STE 210 CITY: PLEASANTON STATE: CA ZIP: 94588 BUSINESS PHONE: 5104687600 MAIL ADDRESS: STREET 1: 4900 HOPYARD RD STE 210 CITY: PLEASANTON STATE: CA ZIP: 94588 FORMER COMPANY: FORMER CONFORMED NAME: SAFETYTEK CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SENSOR CONTROL CORP DATE OF NAME CHANGE: 19911023 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30. 1999 1 ============================================================================== U.S. 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 THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 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 0-15963 INVIVO CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 77-0115161 (State or other jurisdiction (IRS Employer Identification No.) Of incorporation) 4900 HOPYARD RD. SUITE 210, PLEASANTON, CALIFORNIA 94588 (Address of principal executive offices) (Zip Code) TELEPHONE: (925) 468-7600 (Registrant's telephone number) --------------- Indicate by check whether the registrant (1) 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 [ ] The number of shares outstanding of the issuer's Common Stock, par value $.01 per share, at September 30, 1999 was 4,280,949 shares. ============================================================================== 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INVIVO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 JUNE 30, (UNAUDITED) 1999 ------------ ---------- ASSETS Current assets: Cash and cash equivalents $ 527,000 207,800 Short term investments 7,069,200 8,219,100 Trade receivables, net 13,190,500 12,173,800 Inventories 8,644,000 8,177,200 Deferred income taxes 1,289,000 1,289,000 Prepaid expenses and other current assets 714,100 577,800 ------------ ---------- Total current assets 31,433,800 30,644,700 Property and equipment, net 5,767,400 5,026,200 Intangible assets 8,634,600 8,700,300 Other assets 281,600 269,800 ------------ ---------- $ 46,117,400 44,641,000 ============ ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,193,000 2,914,800 Accrued expenses 3,215,300 3,574,300 Current portion of long-term debt and bank borrowings 140,200 140,200 Income taxes payable 1,490,700 1,066,500 ------------ ---------- Total current liabilities 8,039,200 7,695,800 Long-term debt, excluding current portion 1,500,700 1,526,700 Deferred income taxes 200,000 200,000 Other liabilities 52,000 52,000 ------------ ---------- Total liabilities 9,791,900 9,474,500 ------------ ---------- Stockholders' equity: Common stock 42,800 42,800 Additional paid-in capital 26,080,100 26,076,600 Retained earnings 10,233,100 9,074,900 Accumulated other comprehensive loss (30,500) (27,800) ------------ ---------- Total stockholders' equity 36,325,500 35,166,500 ------------ ---------- Commitments and contingencies $ 46,117,400 44,641,000 ============ ==========
See accompanying notes to consolidated financial statements. 2 3 INVIVO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1999 1998 ------------ ------------ Sales $ 12,863,800 11,500,600 Cost of goods sold 6,405,400 5,736,000 ------------ ------------ Gross profit 6,458,400 5,764,600 Operating expenses: Selling, general and administrative 4,012,400 3,845,200 Research and experimental 772,500 690,900 ------------ ------------ Total operating expenses 4,784,900 4,536,100 ------------ ------------ Income from operations 1,673,500 1,228,500 Other income (expense): Interest income 109,800 -- Interest expense (31,300) (82,700) Other, net 2,900 4,600 ------------ ------------ Income before income taxes 1,754,900 1,150,400 Income tax expense 596,700 391,100 ------------ ------------ Net income $ 1,158,200 759,300 ============ ============ Basic net income per common share $ .27 .23 ============ ============ Weighted average common shares outstanding (basic) 4,280,680 3,269,947 ============ ============ Diluted net income per common Share $ .26 .22 ============ ============ Weighted average common shares outstanding (diluted) 4,523,255 3,516,389 ============ ============
See accompanying notes to consolidated financial statements. 3 4 INVIVO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,158,200 759,300 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 311,500 222,500 Loss on sale of property and equipment -- -- Change in operating assets and liabilities: Trade receivables (1,016,700) (363,800) Inventories (466,800) (333,300) Prepaid expenses and other current assets (136,300) (263,400) Accrued expenses (359,000) 44,000 Accounts payable 278,200 (86,600) Income taxes payable 424,200 4,700 ----------- ----------- Net cash provided by (used in) operating activities 193,300 (16,600) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of short term investments 1,147,200 -- Capital expenditures (986,900) (356,200) Intangible assets -- (116,300) Other assets (11,800) 8,200 ----------- ----------- Net cash provided by (used in) investing activities 148,500 (464,300) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock 3,500 12,600 Bank borrowings (repayments), net -- 249,100 Principal payments under long-term debt and other liabilities (26,100) (26,000) ----------- ----------- Net cash (used in) provided by financing activities (22,600) 235,700 ----------- ----------- Net increase (decrease) in cash and cash equivalents 319,200 (245,200) Cash and cash equivalents at beginning of period 207,800 554,100 ----------- ----------- Cash and cash equivalents at end of period $ 527,000 308,900 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Income taxes $ 252,000 373,300 =========== =========== Interest $ 31,300 85,500 =========== ===========
See accompanying notes to consolidated financial statements. 4 5 INVIVO CORPORATION NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL The consolidated balance sheet as of September 30, 1999 and the related consolidated statements of income for the three month periods ended September 30, 1999 and 1998; and the consolidated statements of cash flows for the three month periods ended September 30, 1999 and 1998 are unaudited. The consolidated financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations as of the end of and for the periods indicated. Interim results are not necessarily indicative of results for a full year. The financial statements and notes are presented as permitted by Form 10-Q, and do not contain certain information included in the Company's annual consolidated financial statements and notes. 2. SEGMENT INFORMATION The Company has adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 131, Disclosure About Segments of an Enterprise and Related Information. SFAS 131 establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas, and major customers. The method for determining what information to report is based on the way that management organizes the operating segments within the Company for making operating decisions and assessing financial performance. The Company's chief operating decision-maker is considered to be the Chief Executive Officer (CEO). The CEO reviews financial information presented on a consolidated basis accompanied by information by business segment. The Company operates in two business segments: (i) patient safety monitoring, which designs, manufactures, and markets monitoring systems that measure and display vital signs of patients in medical settings; and (ii) safety and industrial instrumentation, which is engaged in the design, manufacture, and marketing of sensor-based instruments for safety and industrial process control applications. These segments are managed separately because of different customers and products which require different business strategies. The Company evaluates the operating performance of its segments based on net sales and income from operations. Summarized financial information concerning the Company's business segments is shown in the following table. The "Corporate" column includes general and administrative and corporate-related expenses not allocated to reportable segments (in thousands).
SAFETY AND PATIENT SAFETY INDUSTRIAL MONITORING INSTRUMENTATION CORPORATE TOTAL -------------- --------------- --------- ----- For the three months ended September 30, 1999 Net sales........................... $ 7,954 4,910 -- 12,864 Income from operations.............. 1,232 864 (422) 1,674 Depreciation and amortization....... 219 84 9 312 Total assets........................ 26,534 10,064 9,519 46,117
SAFETY AND PATIENT SAFETY INDUSTRIAL MONITORING INSTRUMENTATION CORPORATE TOTAL -------------- --------------- --------- ------ For the three months ended September 30, 1998 Net sales........................... $ 7,111 4,390 -- 11,501 Income from operations.............. 950 703 (424) 1,229 Depreciation and amortization....... 151 69 2 222 Total assets........................ 21,076 8,123 1,837 31,036
5 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 Sales Sales for the first quarter ended September 31, 1999 were $12,863,800, an increase of 11.9% over sales of $11,500,600 for the comparable period of fiscal 1999. The sales increase was primarily due to sales growth at the Company's patient safety monitoring business. Continued strong demand for the Company's next generation MRI vital signs monitor was largely responsible for the sales increase. Sales were also positively affected by increased sales of the Company's gas detection and oxygen monitoring product lines. Gross Profit The gross profit margin remained stable at 50.2% for the three months ended September 30, 1999 as compared to 50.1% for the year earlier period. Operating Expenses Selling, general and administrative expenses for the three months ended September 30, 1999 increased 4.3% or $167,200 over the previous fiscal period. Selling, general and administrative expenses were 31.2% of sales for the first quarter of fiscal 2000 compared with 33.4% for the comparable period in fiscal 1999. The increase in these expenditures in aggregate was largely due to increased administrative expenses in support of the higher sales volume at the patient safety monitoring business. The decrease in these expenditures as a percentage of sales was due to increased efficiency on behalf of the direct sales force at the patient safety monitoring business. The Company expects that selling, general and administrative expenses could increase in the future as the Company seeks to augment the direct sales force. Research and experimental expenses remained at 6.0% of sales for the three-month period ended September 30, 1999. A substantial amount of the aggregate research and experimental expenses are on behalf of the patient safety monitoring business as the Company continued to develop additional features to its Millennia vital signs monitor for specialized market areas. Other Income and Expense Interest income was $109,800 for the first quarter of fiscal 2000. Interest expense decreased to $31,300 in the first quarter of fiscal 2000 compared with $82,700 for the comparable period in fiscal 1999. These changes were the result of the investment of, and the payoff of the outstanding balances on the Company's revolving bank line of credit and term loan with, the proceeds from the secondary stock offering in March, 1999. Provision for Income Taxes The effective tax rate for the first quarter of fiscal 2000 remained at 34%. The effective rate differs from the statutory rate due principally to the benefit of a foreign sales corporation and other credits. LIQUIDITY AND CAPITAL RESOURCES On March 15, 1999, the Company completed the sale of 900,000 additional shares of common stock at a price of $14.75 per share. The Company netted approximately $12,100,000 prior to the repayment of its outstanding bank borrowings of approximately $2,500,000. Working capital at September 30, 1999 increased to $23,394,600 from $22,948,900 at June 30, 1999. Net cash provided by operating activities was $193,300 for the three months ended September 30, 1999 compared with $16,600 used in operations for the three months ended September 30, 1998. This increase was largely the result of the increase in net income offset by changes in operating assets and liabilities, particularly inventories, accounts receivable, and accrued expenses. 6 7 Capital expenditures were $986,900 for the first three months of fiscal 2000 compared to $356,200 for the prior year period. The increase was primarily the result of the purchase of new manufacturing equipment for the Company's oxygen monitoring product line. The Company's bank line of credit of $7,500,000 expires on December 1, 1999. The Company fully expects to renew the line of credit. The Company's revolving bank line of credit is collateralized by the Company's accounts receivable, inventory, and equipment. At September 30, 1999, $7,500,000 was available under the line of credit. The Company believes that its cash flow from operations and proceeds from its secondary stock offering will be adequate to meet its anticipated cash needs for working capital and capital expenditures throughout fiscal 2000. The Company will continue to explore opportunities for the possible acquisitions of technologies or businesses, which may require the Company to seek additional financing. YEAR 2000 READINESS FOR YEAR 2000 Many existing computer systems and related software applications use only two digits to identify a year in the date field, without considering the impact of the upcoming change in the century. Such systems and applications could fail or create incorrect or unintended results unless corrected so that they can process data related to the year 2000 and thereafter. The Company relies on such computer systems and applications in operating and monitoring most major aspects of our business. The Company has evaluated the impact of the year 2000 issue on its business and the related expenses incurred in attempting to remedy such impact. The year 2000 issue could affect the Company in at least three different ways: o The software or the chips embedded within computers and other systems used in the Company's offices and manufacturing facilities could be affected. o The software or the chips used in the products the Company sells could be affected. o Third parties who do business with the Company may not be prepared for the year 2000. The Company determined that regardless of the year 2000 issue, replacement of existing office and other systems would provide more efficient operations and added functionality. The Company contracted with outside information consulting companies both to install new hardware and to replace its current mission-critical software systems with year 2000 compliant software. All information system upgrades and conversions are completed and fully operational. The Company is currently assessing its electronic office and manufacturing equipment to determine if such equipment is dated-sensitive and will require upgrades. If after this assessment the Company determines that some of its equipment needs to be upgraded or replaced, it plans to finish the required work by October 1999. The Company believes that its currently marketed products are year 2000 compliant. Some of its products are not affected because they do not contain a date field in the software. On some previously marketed products which are not year 2000 compliant, the Company will make an upgrade available to its customers to ensure year 2000 compliance. The Company cannot predict the effect of year 2000 problems on its vendors, customers and other entities with which it transacts business, or with whose products its products interact. The Company has undertaken a survey of the year 2000 readiness of these third parties and believes its key vendors are 2000 compliant. COSTS Through September 30, 1999, the Company incurred approximately $350,000 of costs associated with its new information systems, of which approximately $325,000 has been capitalized. Of this, approximately $225,000 has been spent on replacing old hardware, and approximately $100,000 has been spent on replacing old software. Because the Company would have replaced these systems even without the year 2000 problem, its year 2000 expenditures have not deferred other projects that the Company otherwise would have undertaken. RISKS The Company expects to make the changes required to address the year 2000 problems for the software and embedded chips in its offices and manufacturing facilities and in the products it makes. The Company presently believes that with the new software and hardware it purchased and with any required modifications to its office and other systems which it assessment shows to be needed, the year 2000 issues is not reasonably likely to pose significant problems with respect to the Company's operations or products. However, if unforeseen difficulties arise, such modifications, conversions and replacements are not completed on time, or if or customers's or suppliers' systems are not modified to become year 2000 compliant, the year 2000 issue may have a material adverse effect on the Company's business, financial condition and results of operations. 7 8 The Company cannot presently assess the likelihood that it will experience significant problems due to the unresolved year 2000 problems of third parties with which it does business. Although the Company has not been put on notice that any known third party problem will not be timely resolved, it has limited information and no assurance can be made concerning the year 2000 readiness of third parties. If third parties fail to achieve year 2000 compliance, the year 2000 issue may have a material adverse effect on the Company's business, financial condition and results of operations. Similarly, there can be no assurance that the Company can timely mitigate its risks related to a third party's failure to resolve its year 2000 issues. If it fails to timely mitigate such risks, that failure may have a material adverse effect on the Company's business and results of operations. CONTINGENCY PLANS The Company has not attempted to quantify its most likely year 2000 worst-case scenario nor has it considered any contingency plans in case the installations by its outside information consulting companies are not satisfactory for year 2000 compliance, as it believes that the installations will prove sufficient to address the year 2000 issue. 8 9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposure is that of currency risk. During the three months ended September 30, 1999, 16% of the Company's total sales came from non-United States domiciled customers. The Company requires payment in United States (U.S.) currency. If these customers currency devalues against the U.S. dollar, the customers could potentially encounter difficulty in making the U.S. dollar denominated payments. PART II - OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS: Not Applicable. ITEM 2: CHANGES IN SECURITIES: Not Applicable. ITEM 3: DEFAULTS UPON SENIOR SECURITIES: Not Applicable. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS: Not Applicable. ITEM 5: OTHER INFORMATION: Not Applicable. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a)
Exhibit No. Description of Exhibit Page ----------- ---------------------- ---- Exhibit 11.1 Statement of Computation of Net Income Per Share p. 12 Exhibit 27.0 Financial Data Schedule p. 13
(b) Reports on Form 8-K: None. 9 10 SIGNATURES In accordance with requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INVIVO CORPORATION Date: November 15, 1999 By: /s/ JOHN F. GLENN ------------------------------- Vice President-Finance and Chief Financial Officer (Principal Financial and Accounting Officer) 10 11 EXHIBIT INDEX
Exhibit No. Description of Exhibit Page ----------- ---------------------- ---- Exhibit 11.1 Statement on Computation of Net Income Per Share p. 12 Exhibit 27.0 Financial Data Schedule p. 13
11 EX-11.1 2 STATEMENT ON COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11.1 INVIVO CORPORATION AND SUBSIDIARIES STATEMENT OF COMPUTATION OF NET INCOME PER SHARE
THREE MONTHS ENDED SEPTEMBER 30, ---------------------------- 1999 1998 ---------- ---------- BASIC: Weighted average common Shares outstanding 4,280,680 3,269,947 ========== ========== Net Income $1,158,200 759,300 ========== ========== Basic net income per common share $ 0.27 0.23 ========== ========== DILUTED: Weighted average common Shares outstanding (basic) 4,280,680 3,269,947 Dilutive stock options 242,575 246,442 ---------- ---------- Weighted average common Shares outstanding (diluted) 4,523,255 3,516,389 ========== ========== Net Income $1,158,200 759,300 ========== ========== Diluted net income per common share $ 0.26 0.22 ========== ==========
12 EX-27.0 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-2000 JUL-01-1999 SEP-01-1999 527 7,069 13,567 376 8,644 31,434 10,839 5,072 46,117 8,039 0 0 0 43 36,283 46,117 12,864 12,864 6,405 6,405 4,785 0 31 1,755 597 1,158 0 0 0 1,158 .27 .26
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