-----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, OyAhRSp52aZefOd3X5IrMbQHK6xFWk1gWtjiTpWwgtsqzqh5paOjwLAB9E7KB8dC /FgywQEkpXPfZHixxoBP2Q== 0000890566-96-001416.txt : 19960918 0000890566-96-001416.hdr.sgml : 19960918 ACCESSION NUMBER: 0000890566-96-001416 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960804 FILED AS OF DATE: 19960917 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXXIM MEDICAL INC CENTRAL INDEX KEY: 0000858660 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 760291634 STATE OF INCORPORATION: TX FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10600 FILM NUMBER: 96631227 BUSINESS ADDRESS: STREET 1: 104 INDUSTRIAL BLVD CITY: SUGAR LAND STATE: TX ZIP: 77478 BUSINESS PHONE: 7132405588 10-Q 1 QUARTERLY REPORT FOR THE PERIOD ENDED 08/30/96 Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended AUGUST 4, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ____________ to _______________. Commision File Number 0-18208 MAXXIM MEDICAL, INC. (Exact name of registrant as specified in its charter) TEXAS 76-0291634 State or other jurisdiction of (I.R.S. Employee Identification No.) incorporation or organization) 104 INDUSTRIAL BOULEVARD, SUGAR LAND, TEXAS 77478 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code...............(713) 240-5588 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 and 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock: Class Outstanding at September 11, 1996 COMMON STOCK, $.001 PAR VALUE 8,089,127 MAXXIM MEDICAL, INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1.Condensed Consolidated Balance Sheets as of August 4, 1996 and October 29, 1995 2 Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended August 4, 1996 and July 30, 1995 3 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended August 4, 1996 and July 30, 1995 4 Notes to Condensed Consolidated Financial Statements 5 Item 2.Management's Discussion and Analysis of Results of Operations and Financial Condition 8 PART II. OTHER INFORMATION 11 SIGNATURES 12 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MAXXIM MEDICAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) August 4, October 29, 1996 1995 --------- --------- ASSETS (Unaudited) CURRENT ASSETS: Cash and Cash Equivalents ........................ $ 2,705 $ 5,074 Accounts Receivable, net of allowances of $2,698 and $2,054, respectively ................ 84,178 51,276 Inventory ........................................ 94,362 64,649 Prepaid Expenses, Deferred Assets and Other ...... 9,470 4,264 --------- --------- Total Current Assets ........................... 190,715 125,263 PROPERTY AND EQUIPMENT ............................. 116,921 112,134 Less: Accumulated Depreciation ................ (18,697) (16,580) --------- --------- 98,224 95,554 GOODWILL AND OTHER INTANGIBLES, Net ................ 144,538 41,536 DEFERRED TAXES AND OTHER ASSETS, Net ............... 8,660 2,137 --------- --------- Total Assets .................................... $ 442,137 $ 264,490 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current Maturities of Long-Term Debt ............. $ 6,000 $ 11,250 Accounts Payable ................................. 33,004 21,917 Accrued Liabilities .............................. 33,807 18,064 Other Short-Term Obligations ..................... 551 746 --------- --------- Total Current Liabilities ...................... 73,362 51,977 10 1/2% SENIOR SUBORDINATED NOTES .................. 100,000 -- 6 3/4% CONVERTIBLE SUBORDINATED DEBENTURES ......... 28,750 28,750 LONG-TERM DEBT, net of current maturities ......... 116,300 65,737 OTHER LONG-TERM LIABILITIES ........................ 1,615 1,675 --------- --------- Total Liabilities .............................. 320,027 148,139 --------- --------- SHAREHOLDERS' EQUITY Preferred Stock, $1.00 par, 10,000,000 shares authorized, none issued or outstanding ......... -- -- Common Stock, $.001 par value, 40,000,000 shares authorized, 8,127,390, and 8,087,647 shares issued and outstanding, respectively .... 8 8 Additional Paid-in Capital ....................... 91,880 91,677 Retained Earnings ................................ 32,293 23,659 Cumulative Translation Adjustment ................ (2,071) 1,007 --------- --------- Total Shareholders' Equity ..................... 122,110 116,351 --------- --------- Total Liabilities and Shareholders' Equity ...... $ 442,137 $ 264,490 ========= ========= See accompanying notes to condensed consolidated financial statements. 2 MAXXIM MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended -------------------------- ---------------------------- August 4, July 30, August 4, July 30, 1996 1995 1996 1995 -------- -------- --------- --------- Net Sales ................................................ $ 84,128 $ 65,670 $ 261,587 $ 182,547 Cost of Sales ............................................ 61,817 46,097 188,531 126,602 -------- -------- --------- --------- Gross Profit ............................................. 22,311 19,573 73,056 55,945 Operating Expenses: Marketing and Selling ............................... 12,533 11,770 42,229 33,990 General and Administrative .......................... 3,352 2,940 11,209 8,612 Nonrecurring Charges ................................ 0 10,845 0 10,845 -------- -------- --------- --------- 15,885 25,555 53,438 53,447 Income (Loss) from Operations ............................ 6,426 (5,982) 19,618 2,498 Interest Expense ......................................... (1,795) (943) (5,582) (2,001) Other Income (Expense), net .............................. 134 (393) (265) (410) -------- -------- --------- --------- Income (Loss) Before Taxes ............................... 4,765 (7,318) 13,771 87 Income Taxes (Benefit) ................................... 1,813 (2,540) 5,142 80 -------- -------- --------- --------- Net Income (Loss) ........................................ $ 2,952 $ (4,778) $ 8,629 $ 7 ======== ======== ========= ========= Primary Earnings (Loss) Per Share ........................ $ 0.36 $ (0.59) $ 1.04 $ -- ======== ======== ========= ========= Fully Diluted Earnings (Loss) Per Share .................. $ 0.33 $ (0.59) $ 0.97 $ -- ======== ======== ========= ========= Weighted Average Shares Outstanding ...................... 8,309 8,164 8,304 8,155 ======== ======== ========= =========
See accompanying notes to condensed consolidated financial statements. 3 MAXXIM MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, In thousands) Nine Months Ended ---------------------- August 4, July 30, 1996 1995 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income ...................................... $ 8,629 $ 7 Adjustment to Reconcile Net Income to Net Cash Used in Operations: Depreciation and Amortization ............. 10,087 5,904 Change in Operating Assets and Liabilities (12,008) (6,576) --------- --------- NET CASH PROVIDED BY (USED IN) OPERATIONS ............ 6,708 (665) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Property and Equipment, Inventory and Other Assets, Net of Stock Issued Valued at $360 ............................... -- (1,500) Purchase of Medica .............................. -- (11,000) Purchase of Bovie electrosurgery product line ... -- (2,600) Purchase of Glove Operations .................... -- (73,905) Proceeds from the Sale of Henley Assets ......... 6,000 -- Purchase of Sterile Concepts .................... (108,800) -- Purchase of Property and Equipment and Other .... (9,597) (16,055) --------- --------- NET CASH USED IN INVESTING ACTIVITIES ................ (112,397) (105,060) CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) Increase in Negative Book Cash Balance ............................ (304) 1,657 Net Proceeds from the Issuance of Notes ......... 97,000 -- Payments on Sterile Concepts Debt ............... (34,247) -- Borrowings on Long-term Debt--Net ............... 45,313 72,534 Other Financing Activities ...................... (1,364) 83 --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES ............ 106,398 74,274 EFFECT OF FOREIGN CURRENCY TRANSLATION ADJUSTMENT ........................................ (3,078) 759 --------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .................................. (2,369) (30,692) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................... 5,074 31,869 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ........... $ 2,705 $ 1,177 ========= ========= SUPPLEMENTAL DISCLOSURE ON NON-CASH ACTIVITIES Convertible Note Received from the Sale of Henley Assets ............................. $ 7,000 $ -- ========= ========= 4 MAXXIM MEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Maxxim Medical, Inc. and its wholly owned subsidiaries (collectively, the Company). The Company develops, manufactures and markets specialty hospital products. The accompanying unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. These financial statements should be read in conjunction with the Company's annual audited financial statements for the year ended October 29, 1995, included in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission. Certain reclassifications have been made to the 1995 condensed consolidated financial statements to conform with the 1996 presentation. Note 2 - Summary of Significant Accounting Policies Commencing in fiscal year 1994 the Company implemented a fiscal year which ends on the Sunday nearest to the end of the month of October. Normally each fiscal year will consist of 52 weeks, but every five or six years, the fiscal year will consist of 53 weeks. For fiscal 1996 the year end date will be November 3 compared to a 1995 year end date of October 29. Fiscal 1996 will consist of 53 weeks. The third quarter of fiscal 1996 ended on August 4 compared to the fiscal 1995 quarter end date of July 30. Note 3 - Translation of Foreign Currency Financial Statements Assets and liabilities of foreign subsidiaries have been translated into United States dollars at the applicable rates of exchange in effect at the end of the period reported. Revenues and expenses have been translated at the applicable weighted average rates of exchange in effect during the period reported. Translation adjustments are reflected as a separate component of stockholders' equity. Note 4 - Earnings Per Share Earnings per share is based on the weighted average number of common shares and common stock equivalents outstanding for the period. For purposes of this calculation, outstanding stock options are considered common stock equivalents using the treasury stock method. On a fully diluted basis, both net income available to common shareholders and shares outstanding are adjusted to assume the conversion of the 6 3/4% Convertible Subordinated Debentures from the date of issue. 5 MAXXIM MEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5 - Estimates Involved in Preparing the Condensed Consolidated Financial Statements The Company's interim financial statements are prepared in accordance with the same accounting policies as those followed at year end. Certain items in the financial statements can be determined on an interim basis only by making accounting estimates. The accuracy of such amounts is dependent upon facts that will exist and procedures that will be accomplished by the Company later in the year. Certain of the significant accounting estimates related to the accompanying statements are stated below. Inventories - The Company makes a physical count of portions of its inventory at or near year end. The amount reflected as inventory as of August 4, 1996 and the related amount for the cost of sales have been determined using the Company's normal accounting procedures. In management's opinion, no significant adjustment would have been required had an actual count of the inventory been made. Inventory as of August 4, 1996 and October 29, 1995 included the following: August 4, October 29, 1996 1995 --------- ----------- (In thousands) Raw Materials .......................... $41,110 $24,335 Work In Progress ....................... 7,841 7,037 Finished goods and goods purchased for resale ................. 45,411 33,277 ------- ------- $94,362 $64,649 ======= ======= Income Taxes - The Company has calculated current and deferred income tax provisions for the quarters ended August 4, 1996 and July 30, 1995, based on its best estimate of the effective income tax rate expected to be applicable for the full fiscal year. Note 6 - Completion of a tender offer to the shareholders of Sterile Concepts Holdings, Inc. The company's tender offer (the "Tender Offer") to the shareholders of Sterile Concepts Holdings, Inc. ("Sterile Concepts"), which commenced on June 14, 1996, was consummated just prior to the end of its third fiscal quarter. Approximately 98.4% or 5,438,059 shares of Sterile Concepts outstanding common stock was acquired for approximately $108,800,000 in cash or $20 per share. The Company expects to acquire the remaining 88,325 shares, at $20 per share, in a merger expected to be completed prior to the end of its fiscal year. The Company funded the transaction from borrowings under an amended credit facility and the net proceeds from the issuance of 10 1/2% Senior Subordinated Notes (see Notes 7 and 8). The transaction was accounted for by the purchase method of accounting. The financial statements reflect the consolidation of Sterile Concepts balance sheet, however no operating results of Sterile Concepts are reflected in the statements of operations presented herein. 6 Note 7 - Amended Credit Facility On July 30, 1996 the Company entered into an Amended and Restated Credit Agreement ("Credit Agreement") with its primary lender. The Credit Agreement provides for a six year term loan of $90 million and a six year $75 million revolving line of credit. At the end of the fiscal quarter the Company had drawn $32,300,000 on the revolver. Note 8 - Senior Subordinated Notes On July 30, 1996 the Company completed a private placement offering of $100,000,000 of 10 1/2% Senior Subordinated Notes ("Notes"). The Notes mature on August 1, 2006 unless previously redeemed. Interest on the Notes is payable semiannually on February 1 and August 1, commencing February 1, 1997. At its option the Company may redeem the Notes for cash at any time on or after August 1, 2001 at a fixed redemption price in accordance with the terms set forth in the Indenture with respect the to Notes. Net proceeds from the offering of approximately $97,000,000 were used to partially finance the purchase of shares pursuant to the Tender Offer (See Note 6). 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes appearing elsewhere in this report. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage which selected items in the Condensed Consolidated Statements of Operations bear to net sales:
Percentage of Net Sales ----------------------------------------------------- Three Months Ended Nine Months Ended ----------------------- ----------------------- August 4, July 30, August 4, July 30, 1996 1995 1996 1995 --------- -------- --------- -------- Net Sales ..................... 100.0% 100.0% 100.0% 100.0% Cost of Sales ................. 73.5% 70.2% 72.1% 69.4% --------- -------- --------- -------- Gross Profit .................. 26.5% 29.8% 27.9% 30.6% Operating Expenses ............ 18.9% 22.4% 20.4% 23.3% Nonrecurring Charges .......... 0.0% 16.5% 0.0% 5.9% --------- -------- --------- -------- Income (Loss) from Operations . 7.6% (9.1%) 7.5% 1.4% Interest Expense .............. (2.1%) (1.4%) (2.1%) (1.1%) Other Income (Expense), Net ... 0.2% (0.6%) (0.1%) (0.2%) --------- -------- --------- -------- Income (Loss) Before Taxes .... 5.7% (11.1%) 5.3% 0.0% Income Taxes (Benefit) ........ 2.2% (3.9%) 2.05 0.0% --------- -------- --------- -------- Net Income (Loss) ............. 3.5% (7.3%) 3.3% 0.0% ========= ======== ========= ========
Net Sales for the third quarter of fiscal 1996 were $84.1 million, an increase of 28.1% over the $65.7 million reported for the third quarter of fiscal 1995. Net sales for the first nine months of fiscal 1996 were $261.6 million, a 43.3% increase over the $182.5 million reported for the previous year. The Company's gross profit increased to $22.3 million in the third quarter of fiscal 1996 compared to $19.6 million for the same quarter last year. For the nine months ended August 4, 1996, gross profit was $73.1 million versus the $55.9 million reported for the same period last year. The increase in sales and gross profit for both the quarter and nine month periods was primarily due to the world-wide glove operation acquisition completed in July of fiscal 1995. The Company's gross profit rate declined from 29.8% to 26.5 % for the third quarter and from 30.6% to 27.9% for the nine month period of fiscal 1996 versus fiscal 1995. The decline in gross margin rate was caused by the acquisition of the lower margin glove products and the divestiture of the higher margin product lines of the Henley division. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) Operating expenses for the third quarter were $15.9 million or 18.9% of net sales for fiscal 1996 compared to $14.7 million or 22.4% of net sales for fiscal 1995. For the first nine months of fiscal 1996 and 1995 operating expenses were $53.4 million and $42.6 million, or 20.4% and 23.3% of net sales, respectively. The increase in operating expenditures was directly attributable to the glove operations acquisition and the decrease in the operating expense rate to sales was attributable to cost savings that resulted from combining the sales and distribution functions of the glove operations with the existing operations of the Company. During the third quarter of fiscal 1995 the Company recorded a nonrecurring charge of $10.8 million related to the formation of its Case Management division. Interest expense was $1,795,000 or 2.1% of net sales for the third quarter of fiscal 1996 and $943,000 or 1.4% of net sales for the third quarter of 1995. For the nine months ended August 4, 1996 and the nine months ended July 30, 1995 interest expense was $5,582,000 and $2,001,000, or 2.1% and 1.1% of net sales, respectively. The increase in interest expense for both the quarter and nine month periods is directly related to the credit facility established to finance the glove operation acquisition. The Company's effective tax rate for the quarter and nine months ended August 4, 1996 was 38.0% and 37.3% of income before income taxes, respectively. The Company is currently integrating the operations of Sterile Concepts with its already existing operations. However, the Company is experiencing issues relating to the merger with Sterile Concepts. These issues could affect earnings in the fourth quarter and into fiscal 1997. In addition, the Company anticipates taking a one-time charge in the fourth quarter of fiscal 1996 in connection with the merger. Since the Tender Offer was consummated just prior to the end of the third quarter, no operating results of Sterile Concepts are included in the consolidated operating results reported herein. Certain of the matters discussed in this report contain forward-looking statements that involve risks and uncertainties. Although the Company believes that its' expectations are based on reasonable assumptions, it can give no assurance that anticipated results will occur. LIQUIDITY AND CAPITAL RESOURCES At August 4, 1996 the Company had cash and cash equivalents of approximately $2.7 million, working capital of approximately $117.4 million, long-term liabilities of $246.7 million and shareholders' equity of $122.1 million. For the nine months ended August 4, 1996 net cash provided by operations was $6.7 million versus $0.7 million net cash used in operations for the nine months ended July 30, 1995. During the second quarter of fiscal 1996 the Company received approximately $6 million in cash from the sale of certain assets of the Henley Healthcare division. In accordance with the terms of the Company's credit facility $5.6 million of these proceeds were used to retire a portion of the Company's term loan. On July 30, 1996 the Company completed a private placement offering of $100 million 10 1/2% Senior Subordinated Notes, from which net proceeds of approximately $97 million were received by the Company (See Note 8). In addition, pursuant to the terms of an amended Credit Agreement with its primary lender dated July 30, 1996, the Company established a $90.0 million term loan and a $75.0 million revolving line of credit (See Note 7). On August 4, 1996 the term loan was fully drawn and $32.3 million was borrowed on the revolver. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) On July 30, 1996 the Company used approximately $108.8 million in cash to complete a tender offer to the shareholders of Sterile Concepts (See Note 6), approximately $34.2 million in cash to repay the outstanding debt of Sterile Concepts, and $72.7 million in cash to repay outstanding debt related to the previous credit agreement with its primary lender. The Company believes that its present cash balances together with internally generated cash flows and borrowings under its existing credit facility will be sufficient to meet its future working capital requirements. 10 PART II. OTHER INFORMATION Items 1, 2, 3, 4 and 5 for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) - Exhibits - none (b) Reports on Form 8-K *1. Form 8-K dated effective August 14, 1996 regarding the acquisition of Sterile Concepts. An asterisk indicates an exhibit otherwise previously filed with the Securities and Exchange Commission and incorporated herein by reference as indicated. 11 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. MAXXIM MEDICAL, INC. Date:9/17/96 By: /s/ KENNETH W. DAVIDSON Kenneth W. Davidson Chairman of the Board, President & Chief Executive Officer Date:9/17/96 By: /s/ PETER M. GRAHAM Peter M. Graham Treasurer and Chief Operating Officer (Principal Financial Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PART I OF FORM 10-Q FOR THE QUARTERLY PERIOD ENDED AUGUST 4, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS NOV-04-1996 AUG-04-1996 2,705 0 84,178 0 94,362 190,715 116,921 18,697 442,137 73,362 128,750 0 0 8 122,102 442,137 261,587 261,587 188,531 53,438 (265) 0 5,582 13,771 5,142 8,629 0 0 0 8,629 1.04 .97
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